On Health Care, Walker and Rubio Offer ObamaCare-Lite

In today’s Manchester Union-Leader, I explain the eerie resemblance that the health care plans advanced by presidential candidates Gov. Scott Walker (R-WI) and Sen. Marco Rubio (R-FL) bear to ObamaCare:

The centerpiece of both “replace” plans is a refundable tax credit for health insurance. Yet such tax credits already exist, in Obamacare. Also like Obamacare, the Walker/Rubio tax credits would allow Washington to decide how much coverage you purchase, penalize you if you don’t buy that government-defined plan, and conceal massive redistribution of income under the rubric of tax cuts…

How would Walker and Rubio pay for their new spending? Would they keep Obamacare’s tax increases? Raise taxes elsewhere? Would they finance new health care spending by cutting existing health care programs? If so, chalk up yet another way their plans would resemble Obamacare.

I also provide an alternative for reformers who actually want better, more affordable, more secure health care.

Conservatives can offer a better “replace” plan that is politically feasible by expanding a bedrock conservative initiative: health savings accounts, or HSAs, which have already enabled 14.5 million Americans to save more than $28.4 billion for their medical expenses tax-free.

Expanding HSAs would give workers a $9 trillion effective tax cut, without cutting spending or increasing the deficit, and would drastically reduce government control over Americans’ health decisions. Most important, “large” HSAs would spur innovations that make health care better, cheaper, and more secure — particularly for the most vulnerable.

Conservatives need to get this right, lest they repeat the same mistake they made in 1993-94.

For decades, prominent conservatives advocated an individual mandate. The left then picked up the idea and gave us Obamacare. Before they once again fall into the same trap, conservatives should drop any support for the implicit mandate of health-insurance tax credits. Expanding HSAs is more compassionate and provides a direct route toward freedom and better health care.

For more on Large HSAs, see here, here, and here.

Rules of Origin for Autos in the TPP

As the Trans-Pacific Partnership negotiations enter their final stage, one issue remaining to be resolved concerns rules of origin for automobiles.  Rules of origin determine how much of a product needs to be made within the free trade area in order for it to receive duty-free treatment.  This is a tricky issue for automobiles because automakers rely heavily on global value chains where different parts are made in different countries.

Japan wants very liberal rules of origin because its industry’s supply chains include non-TPP countries like Thailand. Canada and Mexico want very strict rules of origin, because their industries benefit from preferential access to the U.S. market through the North American Free Trade Agreement. 

Canada and Mexico’s position in the TPP talks is protectionist. It’s also a consequence of negotiating trade liberalization through regional agreements. In the same way that industries who benefit from protectionism oppose the reduction of trade barriers, industries that benefit from preferential access through trade agreements oppose the reduction of other trade barriers.

Auto manufacturing investment in Canada and Mexico is driven in part by the fact that Canadian and Mexican content make it easier to import into the United States duty free under NAFTA.  If the United States drops trade barriers with other countries, Canada and Mexico become relatively less attractive places to invest.  Tight rules of origin in the TPP would reinforce Canada and Mexico’s advantage.

If negotiations at the World Trade Organization continue to flounder and regional agreements like the TPP proliferate, rules of origin will become a larger and larger problem for global trade.

Should NSA Be Immune from Constitutional Scrutiny?

Today the Court of Appeals for the DC Circuit issued a ruling in NSA v. Klayman that has almost no practical effect, but is a potent illustration of how excessive secrecy and stringent standing requirements effectively immunize intelligence programs from meaningful, adversarial constitutional review.

Contrary to some breathless headlines, today’s opinion does not “uphold” the NSA’s illicit bulk collection of telephone records—which, thanks to the recent passage of the USA Freedom Act, must end by November in any event. Rather, the court overturned an injunction that only ever applied specifically to the phone records of the plaintiffs. And they did so, not because the judges found the program substantially lawful, but because the plaintiff could not specifically prove that his telephone records had been swept into the database, even though the ultimate aim of the program was to collect nearly all such records.

Together with other similar thwarted challenges to mass government surveillance—most notably the Supreme Court case Clapper v. Amnesty International—the decision sends the disturbing signal that mass scale surveillance of millions of innocent people by our intelligence agencies is, for all practical purposes, immune from meaningful constitutional scrutiny. Even when we know about a mass surveillance program, as in the case of NSA’s bulk telephony program, stringent standing rules raise an impossibly high barrier to legal challenges. Perversely, the only people with a realistic chance of challenging such programs in court are actual terrorists who the government chooses to prosecute. The vast, innocent majority of people affected by bulk surveillance—those with the strongest claim that their rights have been violated—are effectively barred from ever having those rights vindicated in court.

Given the routine refusal of courts to step in to protect our Fourth Amendment rights, it is fortunate that Congress has already acted to bring this intrusive and ineffective program to a halt.

With “Friends” Like Saudi Arabia, the United States Doesn’t Need Enemies

One striking feature of the first debate featuring the top tier GOP presidential candidates was how many of them described Saudi Arabia and its allies in the Persian Gulf as “friends” of the United States.  And clearly that is a bipartisan attitude.  Obama administration officials routinely refer to Saudi Arabia as a friend and ally, and one need only recall the infamous photo of President Obama bowing to Saudi King Abdullah to confirm Washington’s devotion to the relationship with Riyadh.

It is a spectacularly unwise attitude.  As Cato adjunct scholar Malou Innocent and I document in our new book, Perilous Partners: The Benefits and Pitfalls of America’s Alliances with Authoritarian Regimes, Saudi Arabia is not only an odious, totalitarian power, it has repeatedly undermined America’s security interests.

Saudi Arabia’s domestic behavior alone should probably disqualify the country as a friend of the United States.  Riyadh’s reputation as a chronic abuser of human rights is well deserved. Indeed, even as Americans and other civilized populations justifiably condemned ISIS for its barbaric practice of beheadings, America’s Saudi ally executed 83 people in 2014 by decapitation.

In addition to its awful domestic conduct, Riyadh has consistently worked to undermine America’s security.  As far back as the 1980s, when the United States and Saudi Arabia were supposedly on the same side, helping the Afghan mujahedeen resist the Soviet army of occupation, Saudi officials worked closely with Pakistan’s intelligence agency to direct the bulk of the aid to the most extreme Islamist forces.  Many of them became cadres in a variety of terrorist organizations around the world once the war in Afghanistan ended.

Saudi Arabia’s support for extremists in Afghanistan was consistent with its overall policy.  For decades, the Saudi government has funded the outreach program of the Wahhabi clergy and its fanatical message of hostility to secularism and Western values generally.  Training centers (madrassas) have sprouted like poisonous ideological mushrooms throughout much of the Muslim world, thanks to Saudi largesse.  That campaign of indoctrination has had an enormous impact on at least the last two generations of Muslim youth.  Given the pervasive program of Saudi-sponsored radicalism, it is no coincidence that 16 of the 19 hijackers on 9-11 were Saudi nationals.

Riyadh also has shown itself to be a disruptive, rather than a stabilizing, force in the Middle East.  Not only has Saudi Arabia conducted military interventions in Bahrain and Yemen, thereby eliminating the possibility of peaceful solutions to the bitter domestic divisions in those countries, the Saudi government helped fund and equip the factions in Syria and Iraq that eventually coalesced to form ISIS.  Although Saudi officials may now realize that they created an out-of-control Frankenstein monster, that realization does not diminish their responsibility for the tragedy.

In light of such a lengthy, dismal track record, one wonders why any sensible American would regard Saudi Arabia as a friend of the United States.  We do not need and should not want such repressive and untrustworthy “friends.”

Rain on EPA’s Parade

No, the “waters of the United States” subject to Clean Water Act regulation do not include things like dry land over which water occasionally flows. That’s the conclusion of a federal judge who just put on hold the Environmental Protection Agency’s latest power grab.

The Clean Water Act empowers EPA and the Army Corps of Engineers to regulate the use of private property that affects “navigable waters,” which the Act defines as “the waters of the United States.” In late June, EPA and the Corps finalized a rule defining that term. This was, they said, a boon to those potentially subject to CWA regulation, because “the rule will clarify and simplify implementation of the CWA consistent with its purposes through clearer definitions and increased use of bright-line boundaries…and limit the need for case- specific analysis.”

In reality, it was yet another step in what the Supreme Court called “the immense expansion of federal regulation of land use that has occurred under the Clean Water Act.” The rule extends federal regulation—and prohibitions on land use—to “tributaries,” which it defines as anything that directly or indirectly “contributes flow” to an actually navigable body of water or wetland and “is characterized by the presence of the physical indicators of a bed and banks and an ordinary high water mark.” The point of that legalese is to reach things like “perennial, intermittent, and ephemeral streams”—in other words, areas that aren’t really “waters” at all. The broader the definition, the more land that is subject to CWA permitting requirements and, ultimately, EPA control.

The problem for the federal government is that the Supreme Court rejected basically the same expansive approach in a 2006 case, Rapanos v. United States. In a separate opinion that some believe to be controlling, Justice Kennedy explained that, to be within the reach of the Act, a water must, at the least, “significantly affect the chemical, physical, and biological integrity of other covered waters more readily understood as ‘navigable.’”

Judge Ralph Erickson recognized that the new rule “suffers from the same fatal defect.” It “allows EPA regulation of waters that do not bear any effect on the ‘chemical, physical, and biological integrity’ or any navigable-in-fact water.” That includes “vast numbers of waters that are unlikely to have a nexus to navigable waters within any reasonable understanding of the term.” In other words, EPA is overreaching once again.

Federal Nuclear Clean Up: $150 Billion

Cleaning up the government’s nuclear weapons sites has become a vast sinkhole for taxpayer dollars. The Department of Energy (DOE) spends about $6 billion a year on environmental clean up of federal nuclear sites. These sites were despoiled in the decades following World War II with little notice taken by Congress. Then during the 1980s, a series of reports lambasted DOE for its lax safety and environmental standards, and federal polices began to change.

Since 1990, federal taxpayers have paid more than $150 billion to clean up the mess from the government’s nuclear sites, based on my calculations. Unfortunately, many more billions will be likely needed in coming years, partly because DOE management continues to be so poor.

A 2003 GAO report (GAO-03-593) found that “DOE’s past efforts to treat and dispose of high-level waste have been plagued with false starts and failures.” And a 2008 GAO report (GAO-08-1081) found that 9 out of 10 major clean up projects “experienced cost increases and schedule delays in their life cycle baseline, ranging from $139 million for one project to more than $9 billion for another.”

The largest of the nuclear clean up sites is Hanford in Washington State. One facility at the site has ballooned in cost from $4.3 billion in 2000 to $13.4 billion today (GAO-13-38). Overall, $19 billion has been spent cleaning up the Hanford site since 1989, and the effort continues to face huge problems (GAO-15-354).

The Washington Post reported yesterday:

A nearly completed government facility intended to treat the radioactive byproducts of nuclear weapons production is riddled with design flaws that could put the entire operation at risk of failure, according to a leaked internal report.

A technical review of the treatment plant on the grounds of the former Hanford nuclear site identified hundreds of “design vulnerabilities” and other weaknesses, some serious enough to lead to spills of radioactive material.

The draft report is the latest in a series of blows to the clean-up effort at Hanford, the once-secret government reservation in eastern Washington state where much of the nation’s plutonium stockpile originated. Engineers have struggled for years to come up with a safe method for disposing of Hanford’s millions of gallons of high-level radioactive waste, much of which is stored in leaky underground tanks.

Obviously this is a complex task, but a former Clinton administration DOE official told the newspaper that DOE:

“has proven to be incapable of managing a project of this magnitude and importance,” Alvarez said. “The agency has shown a long-standing intolerance for whistleblowers while conducting faith-based management of its contractors regardless of poor performance. This has bred a culture in which no safety misdeed goes unrewarded.”

Obama Administration Declares War on Franchisors and Subcontractors

In a series of unilateral moves, the Obama administration has been introducing an entirely new regime of labor law without benefit of legislation, upending decades’ worth of precedent so as to herd as many workers into unions as possible. The newest, yesterday, from the National Labor Relations Board, is also probably the most drastic yet: in a case against waste hauler Browning-Ferris Industries, the Board declared that from now on, franchisors and companies that employ subcontractors and temporary staffing agencies will often be treated as if they were really direct employers of those other firms’ workforces: they will be held liable for alleged labor law violations at the other workplaces, and will be under legal compulsion to bargain with unions deemed to represent their staff. The new test, one of “industrial realities,” will ask whether the remote company has the power, even the potential power, to significantly influence working conditions or wages at the subcontractor or franchisee; a previous test sought to determine whether the remote company exercised “ ‘direct and immediate impact’ on the worker’s terms and conditions — say, if that second company is involved in hiring and determining pay levels.”

This is a really big deal; as our friend Iain Murray puts it at CEI, it has the potential to “set back the clock 40 years, to an era of corporate giants when few people had the option of being their own bosses while pursuing innovative employment arrangements.”

  • A tech start-up currently contracts out for janitorial, cafeteria, and landscaping services. It will now be at legal risk should its hired contractors be later found to have violated labor law in some way, as by improperly resisting unionization. If it wants to avoid this danger of vicarious liability, it may have to fire the outside firms and directly hire workers of its own.
  • A national fast-food chain currently employs only headquarters staff, with franchisees employing all the staff at local restaurants. Union organizers can now insist that it bargain centrally with local organizers, at risk for alleged infractions by the franchisees. To escape, it can either try to replace its franchise model with company-owned outlets – so that it can directly control compliance – or at least try to exert more control over franchisees, twisting their arms to recognize unions or requiring that an agent of the franchiser be on site at all times to monitor labor law compliance.

Writes management-side labor lawyer Jon Hyman:

If staffing agencies and franchisors are now equal under the National Labor Relations Act with their customers and franchisees, then we will see the end of staffing agencies and franchises as viable business models. Moreover, do not think for a second that this expansion of joint-employer liability will stop at the NLRB. The Department of Labor recently announced that it is exploring a similar expansion of liability for OSHA violations. And the EEOC is similarly exploring the issue for discrimination liability.

And Beth Milito, senior legal counsel at the National Federation of Independent Business, quoted at The Hill: “It will make it much harder for self-employed subcontractors to get jobs.” What will happen to the thriving white-van culture of small skilled contractors that now provides upward mobility to so many tradespeople? Trade it in for a company van, start punching someone’s clock, and just forget about building a business of your own.

What do advocates of these changes intend to accomplish by destroying the economics of business relationships under which millions of Americans are presently employed? For many, the aim is to force much more of the economy into the mold of large-payroll, unionized employers, a system for which the 1950s are often (wrongly) idealized.

One wonders whether many of the smart New Economy people who bought into the Obama administration’s promises really knew what they were buying.