Topic: Regulatory Studies

Latest ObamaCare Glitch Enables States to Block New Entitlement Spending

Investors Business Daily reports on the latest glitch found in ObamaCare’s 2,000-plus pages:

Because of a quirk in ObamaCare, people who buy health insurance through a federally run exchange may not be eligible for premium subsidies.

Government-created exchanges are places for individuals to shop and purchase health insurance. ObamaCare will require individuals and families to buy insurance, starting in 2014.

Those with incomes at 100% to 400% of the federal poverty level will be eligible for taxpayer funded subsidies — a tax credit to help pay for the premium.

It turns out that the legislation isn’t so clear, the latest example of what analysts predicted would be a stream of surprises from the mammoth health law.

Section 1311 of ObamaCare instructs state governments to set up an exchange. If a state refuses, Section 1321 lets the federal government establish an exchange in the state.

Yet ObamaCare states that the tax credit is available to people who are enrolled in an “an exchange established by the state under (Section) 1311.” It makes no mention of people enrolled in federal exchanges being eligible for the tax credit.

“There is this technical problem in the law,” said James Blumstein, a professor at Vanderbilt Law School. “I don’t see how you get around that.”

I guess the folks who chanted, “Read the bill!” seem a little less crazy now.

Regrettably, the IRS has tried to “get around” the clear meaning of the law.  In a proposed rule, the IRS writes that taxpayers will be eligible for ObamaCare’s “tax credits” – which are more government spending than  – if they are enrolled in a health plan “established under section 1311 or 1321” [emphasis added].  But that’s not what the law says.  As I told IBD:

“Congress did not delegate this discretion to the IRS,” Cannon said. “Congress created a tax credit for A, and the IRS is saying it applies to A and B. If the IRS offers this tax credit to federally run exchanges, the IRS will be assuming powers the Constitution vests only in Congress to alter the tax code and spend money.”

Citizens have until October 31 to share with the IRS their thoughts about the agency’s overly broad interpretation of its powers (see here).

More broadly, this bug feature means that states can block ObamaCare’s new entitlement spending, and possibly the entire law, just by refusing to create an Exchange:

“The whole structure of the law collapses without a state-run exchange,” said Michael Cannon, director of health policy studies at the libertarian Cato Institute. “That forces Congress to either repeal ObamaCare or significantly alter it.”

Yesterday, Rep. Michael Burgess (R-Texas) helpfully suggested that the so-called “Super Committee” should meet its target of $1.5 trillion in spending reductions by cutting ObamaCare’s new entitlement spending:

The Select Committee is getting to work, and I encourage both parties, all 12 members, to put the Affordable Care Act on the table, alongside other entitlements in need of reform…The easiest money to save is money you haven’t yet spent…This new select committee could easily achieve almost their entire target of reducing the nation’s deficit, and…almost every dollar would come from benefits that do not yet exist.

The wonderful thing about this newly discovered feature of ObamaCare is that states don’t have to wait for Congress to act.  They can reduce federal spending simply by not creating a health insurance Exchange.

Whose Axe Made Your Axe? You Better Find Out

For the second time in two years, federal agents from the U.S. Fish and Wildlife Service have raided two Tennessee factories that make iconic Gibson guitars. The government alleges that Gibson imported woods in violation of the Lacey Act, a century-old law that makes it a federal crime to trade in plants, wildlife, or timber that have been harvested in violation of “any foreign law.”

While this seems simple enough, and the anti-poaching/conservation impulses behind the law are certainly commendable, the Lacey Act has become one of many federal statutes that create invisible minefields of federal regulations into which anyone can stumble unknowingly.

A Gibson Les Paul

In the Wall Street Journal today, Eric Felten discusses the Gibson raid and points out just how dangerous and overblown the Lacey Act has become. Since plants and timber were added to the act in 2008, even individual owners of vintage guitars can run afoul of the act. Felten writes:

If you are the lucky owner of a 1920s Martin guitar, it may well be made, in part, of Brazilian rosewood. Cross an international border with an instrument made of that now-restricted wood, and you better have correct and complete documentation proving the age of the instrument. Otherwise, you could lose it to a zealous customs agent—not to mention face fines and prosecution.

In addition, all the confusing forms must be filled out completely and perfectly, or you could face heavy penalties.

As a guitarist with an appreciation for vintage gear, as well as a Gibson fan, I’ve been following these stories with both a personal and professional interest. Perhaps Gibson has committed bona fide violations of the Lacey Act and perhaps not. I would guess, given the incentives the law creates, that Gibson has done its best to comply. But complying with a law that requires interpreting the interaction of vague foreign laws with vague domestic laws is easier said than done. Like a legal Heisenberg Uncertainty Principle, the laws may not exist until federal prosecutors observe them.

One of the most heartbreaking stories of federal prosecutors running amok with the Lacey Act is the story of Abner Schoenwetter, a grandfatherly Miami seafood importer who spent six years in a federal prison for importing lobster tails that violated the laws of Honduras. Except they didn’t. Honduras filed briefs and testified on behalf of Schoenwetter and his co-defendants, pointing out that what federal prosecutors thought to be Honduran law was not actually Honduran law. Federal prosecutors were unperturbed, however, determined to wipe this menace to society from our streets. (You can read the full, sad story of the case here.)

Although I’m not an insider to the Gibson case, it seems something similar may be going on. During the first raid two years ago, the government seized ebony fingerboards that allegedly violated Madagascar’s laws. To date, however, no charges have been filed. According to Gibson’s press release, the company “obtained sworn statements and documents from the Madagascar government” that the fingerboards “seized in 2009 were legally exported under Madagascar law and that no law has been violated.”

On Wednesday, the government apparently seized materials imported from India that, in alleged violation of Indian law, had not been fully finished by Indian workers. And again, according to Gibson’s press release, the searches were predicated on the “Justice Department’s interpretation of a law in India,” and the “action was taken without the support and consent of the government in India.” Also, notice that the Indian law allegedly violated here has little or nothing to do with preventing poaching or promoting conservation. No matter, however, because the Lacey Act prohibits importation in violation of “any foreign law.”

For those of us who want Gibson to continue making world-class guitars, the legal standards for those who import timber need to be clarified and differentiated from those who are subject to other parts of the Lacey Act, that is, fish and game importers. Unlike smaller, more regional markets for lobsters and other animals, the timber market is a vast supply chain. The timber at the Gibson factory has often gone through many intermediaries, making it incredibly difficult to identify its origins.

Without clarifying the standard of care that Gibson must employ, overzealous federal prosecutors enforcing the vague laws of two countries create a legal black hole around which companies like Gibson must take a wide berth lest they get sucked in. As a result, they may inefficiently over-comply by, for example, stopping importation of all timber from any “problem” area of the world. In other words, Gibson guitars of the future may not have signature ebony fingerboards, even when those fingerboards could have been legally imported. To guitarists everywhere, these details make a difference and they help make Gibson a premiere guitar-maker. Hopefully, it stays that way.

How’s Our ADA Compliance? Dial 1-800-HIRE-SOTS

It seems that Old Dominion Freight Line, Inc., an interstate trucking company, doesn’t want to put drivers with a history of drinking problems behind the wheel. According to a press release issued last week by the federal Equal Employment Opportunity Commission (EEOC) (hat tip: Roger Clegg), that’s a violation of the drivers’ rights under the Americans With Disabilities Act:

[Per the EEOC’s suit] the driver at the Fort Smith location had worked for the company for five years without incident. In late June 2009, the employee reported to the company that he believed he had an alcohol problem. Under U.S. Department of Transportation regulations, the employer suspended the employee from his driving position and referred him for substance abuse counseling. However, the employer also informed the driver that the employer would never return him to a driving position, even upon the successful completion of a counseling program. …

Alcoholism is a recognized disability under the Americans With Disabilities Act (ADA), and disability discrimination violates this federal law. The EEOC said that the company violated both the ADA and the Americans With Disabilities Act Amendment Act of 2008 (ADAAA) by conditioning reassignment to non-driving positions on the enrollment in an alcohol treatment program. In addition, the EEOC argued that Old Dominion’s policy that bans any driver who self-reports alcohol abuse from ever driving again also violates the ADA.

Even well-run alcohol rehab programs are known for having high relapse rates, and Old Dominion would almost certainly face legal liability following a calamitous highway collision caused by a driver’s relapse. But according to the EEOC’s interpretation, requiring the driver to accept permanent reassignment to a less safety-sensitive position (let alone terminating him entirely) is also grounds for liability.

For years the ADA has provided legal muscle to employees terminated for alcohol problems — just the other day, for example, a Florida State University administrator dismissed after frictions with staff sued the university for not accommodating his alcohol abuse. But that’s just the academic setting, where many administrators can glide by in a bit of a haze for years without causing real problems. (UCLA’s Steve Bainbridge quips that the college official’s description of drinking as a “handicap” is off base: “it’s always come in handy for me.”) Are we really required to take chances with 18-wheelers on the highway?

Rachel Maddow’s Big Thoughts on Infrastructure

Is Rachel Maddow sure she wants the government to “think big,” as she says here standing in front of the Hoover Dam?

Maddow’s advertisement on MSNBC caught my eye because it captures the naïve liberal belief in the goodness of large government projects. Liberal pundits keep telling us that we need a giant boost in federal infrastructure spending to aid the recovery. But the pundits never seem to worry about the quality of government investments. And they seem blissfully unaware of the history of damage caused by governments that have thought big on infrastructure.

Hoover Dam was built by the U.S. Bureau of Reclamation, an agency with an appalling history of environmental damage and support of boondoggle projects. For most of the 20th century, the agency ran amok pouring concrete in every river system in the West, and in the process destroying wetlands and salmon fisheries. The government’s Corps of Engineers has a similar record of environmental damage and economic miscalculation on its big infrastructure projects.

It’s not just water infrastructure where “thinking big” by the government has been damaging. Thinking big led to the federal government’s disastrous high rise public housing projects in Chicago and elsewhere. Thinking big led to awful “urban redevelopment” projects that paved over city neighborhoods and replaced them with hideous Soviet-style office blocks.

I don’t want the federal government thinking big on infrastructure, and I doubt if Maddow would either if she knew more about the history. I encourage her to read the classic Cadillac Desert to get a better understanding of what government infrastructure spending on dams is all about. Then I would suggest she do her next MSNBC spot at the site of the Teton Dam in Idaho (see also this and this), which was an economic joke and a federal engineering disaster.

Lawyers and Their Licenses

What do the New York Times, the Brookings Institution, and the Cato Institute have in common?  Turns out we agree on deregulating the legal profession. 

From a Times editorial:  “Another step is to allow nonlawyers into the mix. The American Bar Association has insisted that only lawyers can provide legal services, but there are many things nonlawyers should be able to handle, like processing uncontested divorces. “

From a Brookings op-ed: “It would be better to deregulate the provision of legal services. This would lower prices for clients and lead to more jobs.”

From a Cato paper: “Every state except Arizona prohibits the unauthorized practice of law (UPL); a person must possess an attorney’s license to hold himself out as a lawyer. UPL prohibitions restrict the right to pursue a legitimate occupation and the right to contract with others. By imposing a costly barrier to entry, they distort the market for legal services. Consequently, consumers face higher prices and fewer choices.”

It’s unanimous.  Get going state lawmakers—deregulate the legal profession.

Don’t Nationalize the Past

Recent decades have seen the rise of a new “antiquities law” in which museums and private collectors have come under legal pressures to hand over (“repatriate”) ancient artifacts and archaeological finds to governments, Indian tribes and other officially constituted bodies, even when those artifacts have been in legitimate collector hands for 100 or more years with no hint of force or fraud. Some advocates frankly advance the view that government should entirely ban the private ownership of antiquities or limit it to authorized nonprofit institutions. The latest victim of the trend are numismatists, as the 1983 Convention on Cultural Property Implementation Act authorizes the federal government to restrict importation of some ancient coins based on the expressed wishes of countries that participate in the convention. A federal judge has just rejected a challenge to the law, which – as I argue in a recent op-ed in the Examiner – should not put an end to the controversy.

Paternalism and Parks

Or, as Timothy Egan titles it at the New York Times: “Nature Without the Nanny State.” After reporting on a higher level of deaths this year at Yosemite, and an increased level of warnings and lawsuits, Egan notes:

My experience, purely anecdotal, is that the more rangers try to bring the nanny state to public lands, the more careless, and dependent, people become.

That point might have broader application than national parks.