Will Republicans Expand ObamaCare?

Back when the GOP was selecting its nominee for president last year, I warned my Republican friends that on ObamaCare, Donald Trump might be worse than Hillary Clinton:

Good ol’ partisanship would stop Hillary Clinton from expanding ObamaCare even a little. A faux opponent like Trump could co-opt congressional Republicans to expand it a lot.

I even quipped that a President Trump might sell out ObamaCare opponents for 10 feet of border wall.

It looks like my prediction was eerily accurate. Even as the House Republican leadership and President Trump claim they are moving legislation that would repeal and replace ObamaCare (it wouldn’t), Trump is offering to expand ObamaCare in return for Democratic cooperation in funding a new border wall.

ObamaCare requires participating insurers to offer more comprehensive coverage to low-income enrollees, with the understanding that Congress would compensate insurers for that added cost. The thing is, the Democratic Congress and president that enacted ObamaCare never appropriated funding for those so-called cost-sharing subsidies. President Obama initially recognized the lack of an appropriation, but then began issuing those subsidies anyway–because ObamaCare would have collapsed if he hadn’t.

By that time, Republicans had taken over the House of Representatives, and they sued the Obama administration in federal court for encroaching on Congress’ power of the purse by spending federal funds without an explicit appropriation. A federal judge sided with the House. She ruled that paying those cost-sharing subsidies “violates the Constitution,” and ordered that they stop, pending an appeal, which the Obama administration timely filed.

That was the state of play when President Trump took office. His administration now has three choices.

  1. It can declare that it agrees with the court’s ruling and enforce the court order. This would mean ending the illegal payments that are the only reason ObamaCare is still on the books. If Trump ends those illegal subsidies, it is likely that even more insurers will announce they are leaving the Exchanges. As I have written elsewhere, taking this step would create even more pressure on Congress to repeal ObamaCare, particularly the law’s community-rating price controls that are causing health insurance markets to collapse.
  2. It can appeal the lower court’s ruling. This is the strategy the Obama administration pursued. It would be an awkward step given that Trump’s attorney general Jeff Sessions and Secretary of Health and Human Services Tom Price have each stated they believe these payments are unconstitutional.
  3. It can ask Congress to appropriate the subsidies. This may be the most politically awkward option of all. It would mean the first legislative change that congressional Republicans and the Trump administration make to ObamaCare would not be to repeal it, but to expand it. Funding cost-sharing subsidies would mean Republicans would be providing more money for ObamaCare than a Democratic Congress did at the height of its power.

According to Reuters, the Trump administration has chosen option #3:

President Donald Trump put pressure on Democrats on Sunday as U.S. lawmakers worked to avoid a government shutdown, saying Obamacare would die without a cash infusion the White House has offered in exchange for their agreement to fund his border wall…

Spending legislation will require Democratic support to clear the Senate, and the White House says it has offered to include $7 billion in Obamacare subsidies to help low-income Americans pay for health insurance, if Democrats accept funding for the wall.

Don’t Compel Doctors to Promote State-Favored Programs

Like all states, California has licensed medical centers of every kind. One particular type, often known as a “crisis pregnancy center,” provides pregnancy-related services with the goal of helping women to make choices other than abortion. Based on opposition to these centers, the California legislature enacted a law requiring licensed clinics “whose primary purpose is providing family planning or pregnancy-related services” to deliver to each of their clients the following message: “California has public programs that provide immediate free or low-cost access to comprehensive family planning services (including all FDA-approved methods of contraception), prenatal care, and abortion for eligible women.” But the law also creates an exception for clinics that actually enroll clients in these programs—so, in effect, it applies only to clinics that oppose the very program they must advertise.

Several of these crisis pregnancy centers sued to block the law, arguing that it violated their First Amendment rights by forcing them to express a message to which they are opposed. But the U.S. Court of Appeals for the Ninth Circuit upheld the law, holding that it regulates only “professional speech” and therefore should be reviewed under a more deferential standard, rather than the normal strict judicial scrutiny that applies to laws compelling speech. The centers have petitioned the Supreme Court to review their case; Cato has filed a brief supporting that petition.

Good News for Earth Day: A Negative Result from Ocean Acidification

In 2012, Stanford’s Daniele Fanelli published a provocative paper, “Negative Results are Disappearing in Most Disciplines and Countries” in the prestigious about-science journal Scientometrics. It demonstrated a remarkable increase in the number of papers reporting “positive” results, meaning those that found data in support of a prior hypothesis.

The reasons are manifold and in part to do with the way that we fund science. Research proposals usually include some statements of hypotheses that serve as the rationale for funding. For example, one might hypothesize that global warming will increase heat-related death, reduce crop yields, or cause wars. And, almost always, the funded scientists will find evidence to support each hypothesis.

Part of this has to do with the way agencies dole out the dough. There’s usually a meeting of five or so folks who wade through maybe a hundred proposals. There’s general discussion about which ones are worth funding, often centering around objectives and hypotheses. Upon funding, research that does not support a funded hypothesis will threaten a grant renewal.

“Ocean Acidification” will be, in our humble opinion, the next in a long line of ends-of-the-worlds that we have come to be used to. Global cooling, acid rain, stratospheric ozone depletion, tropospheric ozone increases, and global warming come to mind, in sequential order, soon to be followed by ocean acidification as our environmentalist friends become frustrated with any real meaningful policies to forestall our heretofore torpid warming.

Oddly enough, there are vast areas of the central Atlantic and Pacific oceans with naturally very low pH, or relative acidity, compared to the rest of the sea, and their relative acidity changes are large, compared to any small changes that humans have foisted on the ocean. Given that there’s often considerable biodiversity in these regions, isn’t it odd that virtually all research findings show ocean acidification to be deleterious? Kloekel (2010) performed a meta-analysis of nearly 600 findings and found approximately 97% deleterious results. That only 3% were salutary seems odd on a world where ocean pH naturally varies so much.

A recent “exception” was just published—deVries et al. (2016) in Scientific Reports. They set out to “examine the long-term effects of moderate increases in pCO2 and temperature” on the stress physiology and the hard exoskeleton of shrimp. It is a standard meme that decreasing pH, in general, is bad for hard-shelled organisms. They varied the pH and the temperature in a controlled laboratory setting. The working hypothesis was that lowered pH (more “acidic”) along with high temperature would elicit a stress response and render the shell more brittle.

Didn’t happen. Contrary to their initial thinking, the mantis shrimp exhibited an “apparently large tolerance range for changes in environmental pH and temperature.” More specifically, they found that “N. bredini showed no changes in growth, molting, enzymatic and protein indicators of oxidative stress, exoskeleton morphology, calcium content, or mechanical properties in response to experimental pH and temperature stressors,” which findings, in their words, suggest “that this species has evolved compensation mechanisms to cope with significant environmental change.” And if this one species has developed compensation mechanisms, it is not an illogical stretch to assume that other intertidal species have done so too.

Consequently, alarmist concerns for the future well-being of marine life in response to the twin evils of ocean acidification and warming are tempered (again) by observations showing that life tends to find a way to cope with the many challenges it faces.

 

References:

deVries, M.S., Webb, S.J., Tu, J., Cory, E., Morgan, V., Sah, R.L., Deheyn, D.D. and Taylor, J.R.A. 2016. Stress physiology and weapon integrity of intertidal mantis shrimp under future ocean conditions. Scientific Reports 6: 38637, DOI:10.1038/srep38637.

Kroeker, K.J., et al, 2010. Meta-analysis reveals negative yet variable effects of ocean acidification on marine organisms.  Ecology Letters, (2010) 13: 1419–1434 doi: 10.1111/j.1461-0248.2010.01518.x

Corporate Tax Cuts: Canada’s Experience

President Donald Trump and congressional Republicans are proposing to cut the corporate tax rate. With any tax cut, members of Congress want to know how much revenue the government may lose from the reform. I do not think that cutting our 35 percent federal corporate tax rate to 20 percent or so would lose the government any money over the long term. U.S. and foreign corporations would invest more in the United States, which would boost our economy, and corporations would avoid and evade taxes less.

Canada provides us with a real-world trial run of corporate tax cuts, and new budget data includes the latest revenue estimates. The nation slashed its federal corporate tax rate from 38 percent in the mid-1980s, to 29 percent by 2000, to 15 percent by 2012, as shown in Chart 1 below. Has the government lost revenue?

You be the judge. Chart 2 shows that corporate tax revenues in Canada have fluctuated with the ups and downs in the economy—revenues fell, for example, during recessions in the early 1990s and 2009. But even with the modest Canadian economic growth of recent years, revenues have held up under a much lower rate. Corporate tax revenues are 2.1 percent of gross domestic product (GDP) today, which is a bit higher than in the mid-1980s when the rate was more than twice as high.

Let’s compare to the United States. While Canada’s 15 percent federal corporate tax will raise 2.1 percent of GDP this year, the 35 percent U.S. federal corporate tax will raise just 1.7 percent. Thus, the Canadian corporate tax raises relatively more than the U.S. tax—even though the rate is less than half the U.S rate.

 

 

Canada historic tax revenues here. New Canadian budget data here.

 

Internet Speech 2016: More Regulation Needed?

Election law expert Nathaniel Persily has written an interesting article about the Internet and the 2016 election. The problems Nate (and others) see in 2016 will inform the debate about free speech now and in future elections.

Persily notes that the 2016 campaign saw an “online explosion of campaign-relevant communication from all corners of cyberspace.” Here’s his description of the Trump campaign’s social media efforts:

Employing traditional web-based communication, event promotions, new apps, native advertising (in which web ads are designed to look like articles in the publication containing them), and new uses of social media, the campaign launched 4,000 different ad campaigns and placed 1.4 billion web impressions (meaning ads and other communications visible to individual users)…the campaign targeted 13.5 million persuadable voters in sixteen battleground states, discovering the hidden Trump voters, especially in the Midwest, whom the polls had ignored.”

Trump himself tweeted a great deal, having 13 million followers by election day. But the mainstream media also picked up the tweets and prompted wide discussion and attention to them. Trump garnered about $4 billion in free media during the primaries and the general election, an astonishing sum. The new media thus drove the agenda for the mainstream media; in the past, the latter shaped the agenda for everyone.

From a First Amendment perspective, 2016 saw more speech by more people than previous elections. The election also showed that you can win the White House without dominating fundraising, an outcome that weakens the case for campaign finance regulation. Both results seem good for free speech.

However, Nate Persily is a learned and sensible analyst, and his concerns about 2016 merit our attention.

Protections on Steel Hurt Downstream Exporters

It has been widely reported that President Trump may impose high tariffs on steel imports on national security grounds. Scott Sumner has a good summary on why this rationale is not particularly convincing. But even if President Trump is not persuaded by Sumner on national security, perhaps he will be interested to hear how protectionism will affect the other manufacturing industries he purports to want to flourish.

Last year, a paper by economist Bruce Blonigen explored the impact of industrial policies in steel on downstream industries, i.e. those where steel is an input to the production process. Unsurprisingly, less openness to foreign competition through direct protection or state support or privileges raises the price of steel within a country. This in turn raises costs for downstream industries such as fabricated metals and machinery manufacturers.

More pertinently given Trump’s obsession with trade deficits, Blonigen’s work suggests the effect of this cost increase is to significantly reduce exports from these industries. The headline result is that a one standard deviation increase in industrial policies associated with steel leads to a 1.2 percent decline in the export competitiveness of the average manufacturing sector in the years immediately after implementation. For those that use steel intensively, the decline is as large as 6 percent.

If President Trump really wants an export-led manufacturing jobs boom then, his steel policies are utterly self-defeating.

Supreme Court Reaffirms the Presumption of Innocence

On Wednesday, the Supreme Court decided a relatively small but important case out of my home state of Colorado. Colorado, like many states, imposes certain monetary penalties and costs on convicted defendants. Those can include court costs, docket fees, and payments into victim restitution funds. What happens, however, if a defendant’s conviction is later overturned, either by a higher court or on a re-trial? Can the once-convicted defendants easily get their money back, as would seem to be only fair? Not in Colorado, which is (was) unique in requiring that exonerated defendants go to court again to prove their innocence by clear and convincing evidence before they could get their money back. Thankfully, the Supreme Court, in a 7-1 opinion (Justice Gorsuch only began participating in cases in the last two weeks), held that Colorado’s “Exoneration Act” violates the due process guarantee of the Fourteenth Amendment.

Nelson v. Colorado is a combination of two different cases. One concerned Shannon Nelson, who was convicted by a jury of two felonies and three misdemeanors arising from the alleged sexual and physical abuse of her four children. Nelson conviction was reversed on appeal, however, and on retrial she was acquitted of all charges. In the course of her ordeal, Nelson paid $8,192.50 in costs and fees.

Louis Madden, the petitioner in the other case, was convicted of patronizing a child prostitute and third-degree sexual assault. His conviction was later overturned by the Colorado Supreme Court, and the state declined to retry the case. Madden paid the state $1,977.75 in the course of his legal troubles.

Although Madden and Nelson were innocent of their crimes in the eyes of the law–remember everyone is innocent until proven guilty by a legally proper trial (Cato’s brief in the case focused on the deep historical roots of the presumption of innocence)–they were faced with having to prove their innocence in a subsequent civil proceeding if they were to get their money back. Instead, they went all the way to the Supreme Court, arguing that it was unconstitutional to require them to do anything more to prove their innocence.

Writing for the Court, Justice Ruth Bader Ginsburg made fairly short work of Colorado’s law. “The sole legal basis for these assessments was the fact of Nelson’s and Madden’s convictions,” she wrote, and “absent those convictions” Colorado has “no legal right to exact and retain petitioners’ funds.” Once the convictions were erased, “the presumption of their innocence was restored” and “Colorado may not presume a person adjudged guilty of no crime, nonetheless guilty enough for monetary exactions.”

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