This morning, the Congressional Budget Office (CBO) released its updated Budget and Economic Outlook report, known in Washington, D.C. parlance as the “baseline.” This report details CBO’s projections on federal spending and revenue for this year and into the future.
Below are a few key points from the new report.
- The deficit for 2014, the difference between federal spending and revenue, will be $506 billion, up from the $492 billion forecasted in April. This is driven by lower-than-expected corporate income tax revenue.
- According to CBO, Medicaid spending jumped 15 percent year-over-year. Adding millions of new individuals under ObamaCare to Medicaid comes at a steep price. Social Security spending jumped 4.6 percent.
- The entitlement programs continue to drive spending projections and put enormous weight on the budget. CBO estimates that Social Security, the major health care programs, and interest account for 85 percent of projected spending increases over next ten years.
- Mandatory spending–which includes the big entitlement programs–will increase 5.5 percent annually over next ten years. ObamaCare leads the way. The newly created subsidies for health insurance will cost taxpayers $1 trillion over ten years, growing from $17 billion in 2014 to $450 billion in 2024.
- The one bright spot continues to the Budget Control Act of 2011 which is controlling the growth of discretionary spending. Fiscal Year 2015 spending will be $1.016 trillion compared to $1.014 trillion in FY14.
Reports are out this morning that Louisiana will be challenging in court federal coercion behind the Common Core standards. If so, it will open a new front in the war against the Core, a standardization effort that has been listing badly in public opinion, but nonetheless survives in the vast majority of states. That could very well change should the force of Race to the Top funding or, more importantly today, waivers from the No Child Left Behind Act, be eliminated by the courts, as Core supporters likely knew when they asked for federal pressure.
Does this suit have a chance of success? I’m not a lawyer – though I’ll be consulting a few! – so this is not the best-informed legal analysis. From what I do know, though, the chances of prevailing are middling, at best. The courts in the past have been pretty lenient in cases in which Washington gets states to do its bidding in exchange for funding when the feds don’t have authority in the Constitution to do something. And the Louisiana suit hinges largely on federal action that seems very intentionally to push the Core – standards “common to a majority of states” under RTTT, and only one other standards option to get a waiver – but that doesn’t state outright that the Core must be adopted. That way the feds can say they aren’t prescribing a specific “program of instruction,” which would clearly violate the letter of several education laws, while in reality very much requiring such a program.
Sadly, one major diversion likely to be employed by Core opponents to battle this suit is impugning Governor Bobby Jindal’s motives. Since Jindal first reversed course on the Core, supporters of the standards have said his stance is all about presidential aspirations and not about what’s best for kids. Those may well be his motives, I don’t know. But as with all aspects of the Core debate, we should focus on the merits of the arguments being employed, not the motives for offering them. (This goes for opponents who attack people like Bill Gates, too.) We should look at the merits of the lawsuit, which requires an honest assessment of both the Constitution and federal education statutes, just as we should look at the research on national standards, the content of the Core, and the reality of how so many states adopted standards that are now heavily disliked.
Do those things, and I think the Core loses hands down. Ignore them completely, and everyone loses.
BEIJING—Today China’s big cities look much like urban areas anywhere in the world. There are lots of cars. What I didn’t expect was to see a Christian “fish” on an auto.
Religion is “on the rise,” one U.S. diplomat told me.
It also is under attack by the Chinese government. As I wrote in the American Spectator online: “When it comes to religious liberty in the People’s Republic of China, there’s the (surprisingly frequent) good, (not so constant) bad, and (still too often) ugly.”
China turned hostile to Christianity after the 1949 revolution. The PRC has routinely been ranked among the worst religious persecutors.
In its latest report on religious liberty, the State Department observed: “The government exercised state control over religion and restricted the activities and personal freedom of religious adherents when these were perceived, even potentially, to threaten state or Chinese Communist Party (CCP) interests, including social stability. The government harassed, assaulted, detained, arrested, or sentenced to prison a number of religious adherents.”
Nevertheless, the experience varied geographically: “In some parts of the country, however, local authorities tacitly approved of or did not interfere with the activities of unregistered groups.”
The group China Aid, headed by Bob Fu, a former house church pastor, compiled a list of incidents. The authorities in Zhejiang Province have been particularly repressive, destroying churches and crosses.
Provincial officials pointed to the zoning laws to justify this and similar actions elsewhere, but Renee Zia, of Chinese Human Rights Defenders, argued that it was just “an excuse for the current wave of clamping down on Christian churches.” The government’s real concern is Christianity’s growth. Provincial party chief Xia Baolong reportedly complained that Christian symbols were too “conspicuous.”
Still, the situation in the PRC is far better than it was even a decade or two ago. The majority of persecution cases, wrote blogger Renee Riley, involved Christians who “were either engaged in activity which the government perceived as a threat, or they ran afoul of the economic or political interests of corrupt local leaders.” Open Doors reported that the government has “chosen not to strictly control Christian activities in most regions in China,” and that the majority of churches “are not registered, but tolerated.”
The number of Christians was estimated in 2011 by Pew Research at 67 million and likely is much higher today. There already may be more Christians than Chinese Communist Party members. Yang figured there could be 247 million Christians by 2030.
The PRC hopes to constrain Christianity by forcing it into a “patriotic” channel. Nevertheless, the PRC may not find it easy to create a Sinicized Christianity. I attended the 800-member Beijing Chaoyang Church. There were 70 baptisms on the day I attended. The church is state-sanctioned, but the sermon seemed orthodox theologically (simultaneous translation was provided for foreigners).
My friend Phil Sheldon, who regularly attends the church with his Chinese wife, spoke positively of his experience. He earlier wrote: “I have seen and heard Christianity expressed in public. I have been in restaurants with Christian music playing.” And then there’s that car sporting a “fish”!
Even some CCP members recognize the challenge. Admitted Wang: “If we rush to try to push for results and want to immediately ‘liberate’ people from the influence of religion, then it will have the opposite effect.”
In the PRC today, people are ever less willing to worship the false god of communism.
Gabriela Calderon de Burgos
A new “monetary and finance” law that was approved by Ecuador’s National Assembly in July, is expected to be signed into law any day now. Many suspect that this marks the beginning of the end for dollarization in Ecuador, which began in January of 2000. But the underlying threat to dollarization is the incessant growth of public spending. Losing dollarization would be a sad development, considering it is what has protected Ecuadorians from one of the worst evils of populism: high inflation.
The remarkable contribution dollarization has made to the Ecuadorian economy is worth noting. A 2010 study published by Ecuador’s central bank (BCE) analyzed the first decade of the absence of independent monetary policy and found that average GDP growth increased from -6.3 percent during the 1990s to 4.4 percent during the 2000s; annual inflation decreased from a high of 90 percent in September of 2000 to single digits within a year, and has averaged 3 percent since 2004. Additionally, interest rates went down immediately, thereby reducing the cost of capital. According to the World Bank, the percentage of Ecuadorians living on less than $2 a day (PPP) decreased from 37.7 percent in 2000 to 10.6 percent in 2009.
Of course, there are many problems dollarization cannot solve and the positive outcomes above are not solely due to it. But it probably has been one of the main factors contributing to Ecuadorian growth prior to and during our current “revolutionary” government. In fact, Ecuador owes its superior economic performance today–compared the two most prominent populist nations in the region, Argentina and Venezuela–mostly to dollarization.
Ecuadorians love getting paid and saving in American dollars–and the government knows this. So why would de-dollarization be more likely today than seven years ago when Rafael Correa became president? Mainly because public spending has increased to unsustainable levels and will most likely continue its breakneck growth as Correa seeks to stay in power indefinitely or, at least, beyond 2017. Additionally, Ecuador’s 2008 Constitution made the BCE explicitly part of the executive branch (Article No. 303) and retained its power to issue currency of legal tender. Moreover, the new monetary and finance law contains several provisions that are only applicable if the BCE were to issue a national currency again. These include, for example, a whole chapter on the “exchange rate regime,” the ability to perform open market operations, and to use the rediscount window to ensure liquidity within the economy.
Most of the discussion has revolved around the provisions of the new monetary and finance law and how it might be the first step towards a return to a national currency. But laws and constitutions come and go fairly easily in Ecuador and are frequently violated if politics make it convenient to do so.
As F.A. Hayek explained in his book Denationalization of Money, national state monopolies over the issuing of money arose out of the discovery by kings that they could finance their uncontrolled spending by reducing the metallic content of the currency and forcing people to accept the devalued coins. Likewise, the main threat to dollarization is the incessant growth of public spending. More public spending increases the temptation to go back to the days when Ecuadorian politicians could monetize debt via the BCE. Public spending has grown from 24.6 percent of GDP in 2007 to 44.4 percent in 2013. Just so that you get an idea of the incredible growth of spending, this year’s projected fiscal deficit of $9.2 billion is almost equivalent to the total government spending in 2006 ($9.927 billion).
The government is already showing signs of a fiscal squeeze and making adjustments might be a difficult pill to swallow. For instance, expected government spending in the bureaucracy ($8.433 billion) and in subsidies ($6.213 billion) for 2014 would no longer be covered by expected tax revenue ($13.965 billion). These expenditures, like most other budget items, are politically costly to reduce. Public investment, however, is one of the few areas of the budget that could be easily trimmed. But the development model of Correa’s so called “citizen’s revolution” has crowded out so much private investment that the economy has become very dependent on public investment for growth.
If the government continues down this path of fiscal irresponsibility, the temptation to use the printing press at the BCE might become irresistible. The cherry on top of all of this is that the new penal code that went into effect this month makes it a crime—punishable with up to seven years in jail—to “publish, broadcast or spread” economic or financial information that, according to the authorities, is false and might cause economic or financial “panic.”
Patrick J. Michaels and Paul C. "Chip" Knappenberger
Global Science Report is a feature from the Center for the Study of Science, where we highlight one or two important new items in the scientific literature or the popular media. For broader and more technical perspectives, consult our monthly “Current Wisdom.”
Climate alarmism is like one of those pop-up Bozos. No matter how many times you bop it, up it springs. In fact, the only way to stop it, as most kids learn, is to deflate it. In this case, the air inside Bozo is your and my tax money.
Two scientific papers released last week combine for a powerful 1-2 haymaker, but, rest assured, Bozo springs eternal. The first says that human aerosol emissions are not that responsible for offsetting the warming influence of greenhouse gas emissions, while the second finds that the observed warming from human greenhouse gases is less than a lot of people think.
We aren’t at all surprised by the first result. The cooling effect of sulphate particulates, which go into the air along with carbon dioxide when fossil fuels (mainly coal) are combusted, was only invoked in the mid-1980s, when the lack of warming predicted by computer models was embarrassingly obvious.
This is the kind of thing that the iconic historian of science, Thomas Kuhn, predicted in his classic book, The Structure of Scientific Revolutions. When a scientific “paradigm” is assaulted by reality, increasingly ornate and bizarre explanations are put forth to keep it alive. Sulfates smelled like one of those to us back in the 1980s, and now it looks like the excuses are finally getting comeuppance.
The second result also comes as little news to us, as we have been saying for years that the human carbon dioxide emissions are not the only player in the climate change game.
The two new papers, in combination, mean that the human influence on the climate from the burning of fossil fuels is far less than what the IPCC’s ensemble of climate models says it is. This also goes for the U.S. Global Change Research Program, the EPA ,and the White House.
Rest assured, though, Bozo will rise again—despite a near-continuous barrage of blows supporting the idea that the climate’s sensitivity to human greenhouse gas emissions is far too low to justify any of the expensive and futile actions emanating from Washington and Brussels.
The aerosol paper describes research by a team of Israeli scientists led by Gerald Stanhill (from the ARO Volcani Center) who examined the causes of “solar dimming” and “solar brightening” that have taken place over the past half-century or so. Solar brightening (dimming) refers to multidecadal periods when more (less) solar radiation is reaching the surface of the earth. All else being equal (dangerous words in Science), the earth’s surface would warm during periods of brightening and cool during dimming. Solar dimming has been reported to have taken place from the 1950s through the 1980s and since then there has been a period of recovery (i.e., brightening). These patterns have been linked by many to human aerosol emissions caused by pernicious economic activity, with heavy emissions leading to global cooling from the 1950s (witness the opaque air of Pittsburgh and London) through the late 1970s and then, as air quality was cleaned up and aerosol emissions declined, an unmasking of the warming impact from greenhouse gas emissions.
This is an essential storyline that might as well have been written by Kuhn. Without invoking the previously undiscovered masking impact of human aerosols, climate models predict that far more global warming should have happened as a result of human greenhouse gas emissions than has been observed, even by the 1980s. Behaving more predictably than the climate, federal climatologists, led by Tom Wigley of the University Corporation for Atmospheric Research (hey, we couldn’t make up the name of that exclusively taxpayer-funded monster), relied on the aerosol “knob” to try to keep climate models from overheating.
Stanhill et al. have bad news for the feds. In their new paper, they examine the records of sunshine duration as recorded at five observation sites with long-term observations. When comparing these sunshine histories with fossil fuel use histories (a proxy for aerosol emissions) from nearby areas, they find very little correspondence. In other words, human aerosol emissions aren’t to blame for much of the solar dimming and brightening.
What may be the cause? Variations in cloud cover.
According to Stanhill and colleagues:
It is concluded that at the sites studied changes in cloud cover rather than anthropogenic aerosols emissions played the major role in determining solar dimming and brightening during the last half century and that there are reasons to suppose that these findings may have wider relevance.
Admittedly, there are only a small number of stations that were being analyzed, but Stanhill et al. have this to say:
This conclusion may be of wider significance than the very small number of sites examined in this study would suggest as the sites sampled Temperate - Maritime, Mediterranean, Continental and Tropical climates,… and covered a wide range of rates of anthropogenic aerosol emission.
The implications are that human aerosols have played a lot smaller role in the global temperature variability of the past 50 years than is generally taken to be the case. And if human aerosols are not responsible for muting the expected temperature rise from greenhouse gas emissions, then it seems that the expected rise is too much. That is, the earth’s temperature is less sensitive to rising greenhouse gas concentrations than forecasted by governmental climate models, and therefore we should expect less warming in the future.
The second paper, published last week in Science, is yet another study trying to explain the “pause” in the rise of global average surface temperatures. Using annual data from the University of East Anglia temperature history—the one that scientists consult the most, we are now in our 18th year without a warming trend.
(For a revealing exposé on how even this data is being jimmied to fit the paradigm, see what just showed up in the most recent Weekend Australian.)
University of Washington’s Xianyao Chen and Ka-Kit Tung found that a naturally occurring change in ocean circulation features in the Atlantic Ocean can act to enhance or suppress the magnitude of heat that is transferred from the surface into the ocean depths. The authors find that this natural cycling was responsible for burying additional heat since the late 1990s while maintaining surface heating during the previous three decades. Coupled with earlier research (Tung and Zhou, 2013), they figure that a substantial portion (~40%) of the rise in the global surface temperatures that has occurred since the mid-20th century was caused by natural variability in the circulation of the Atlantic Ocean.
The implication here is pretty clear—the role that human greenhouse gas emissions play in the observed warming isn’t what it was cracked up to be. And, with a little nudge from other variables—like the sun—the quaint myth that “all scientists agree that the majority of warming since 1950 has been caused by human activity” does look more and more like another pop-up Bozo.
Taken together, the two paper combination strikes a haymaker to the alarmist mantra—that dangerous climate change will result from greenhouse gas emissions. The Stanhill paper suggests that the projected warming wasn’t so masked by sulfate aerosols, and the Chen and Tung paper argues that less of the warming is due to a human influence anyway. This combination—greater warming pressure and less temperature change—means that the IPCC and federal climate models are just way off.
Going forward, we should expect much less human-induced global warming than government-fueled climate models project.
If this refrain sounds familiar, it is because we find ourselves frequently reporting on the subject of the earth’s climate sensitivity (how much warming results for a given input of carbon dioxide). This issue is the biggest key to understanding anthropogenic climate change, and, because evidence continues to mount that the climate sensitivity is much less than advertised, there will be much more where this came from.
But Bozo, inflated by public monies, will spring eternal.
Chen, X., and K-K Tung, 2014. Varying planetary heat sink led to global-warming slowdown and acceleration. Science, 345, 897-903.
Kuhn, T. S., 1962 (and reprints). The Structure of Scientific Revolutions. University of Chicago Press„ 174pp.
Stanhill, G., et al., 2014. The cause of solar dimming and brightening at the Earth’s surface during the last half century: evidence from measurements of sunshine duration. Journal of Geophysical Research, doi: 10.1002/2013JD021308
Tung, K-K., and J. Zhou, 2013. Using data to attribute episodes of warming and cooling in instrumental records. Proceedings of the National Academy of Sciences, 110, 2058-2063.
New Census data shows that the number of households receiving welfare benefits hit a record high of almost 33.5 million in the fourth quarter of 2012. While part of the surge was due to the recession, the proportion receiving benefits has increased from 25.2 percent to 27.4 percent since the recession officially ended in June 2009. These inflated welfare rolls are not just a temporary response to an economic downturn, and could instead become the new normal. This poses a problem not only for the country as a whole, but for the individuals beneficiaries as well. These welfare programs could eventually become unaffordable as programs for the elderly take up an increasing share of our budget. At the same time, for a record number of beneficiaries the structure of our current system could actually make it less likely they escape poverty for good.
Of particular concern are the households participating in three or more means-tested non-cash programs, which has also increased significantly, rising from 7.3 percent of all households at the end of the recession to 8.6 percent by the end of 2012. Participation in multiple programs is even more commonplace among families headed by a single mother, similar to the case family we used in The Work versus Welfare Trade-off 2013. In that paper, we found that in some states, the welfare benefits package available could be so generous that it could disincentivize work in some cases. One critique of the paper was that not every low-income household qualified for the programs in our benefit package. This is true, and we acknowledged as much in the paper. We even included a scenario where the family only received benefits from a more limited package. However, this Census data shows that cases like the one we examinedare becoming increasingly common. Almost 44 percent of households headed by a single mother participated in three or more means-tested non-cash programs in 2012, compared to only 38.7 percent when the recession ended. While the point remains that not every low-income household participates in every welfare program, many do participate in multiple programs, and the proportion has continued to increase years after the recession ended.
These are the people most at risk of becoming caught in a “poverty trap,” in which the very programs intended to help them can actually make if more difficult for them to escape poverty. In these cases, people could find that it is not worth it to enter the workforce or increase their earnings because they face very high effective marginal tax rates. For each additional dollar they earned, they would lose almost as much through the loss of benefits and taxes. A study in the National Tax Journal found that a single parent with two children trying to move from the poverty level to 150 percent of the poverty line faced an average effective marginal tax rate of almost 77 percent. Over that range, these people are keeping less than a quarter of each dollar earned. Through these significant work disincentives, our current system inhibits recipients’ ability to eventually earn enough to transition out of these programs and escape poverty for good.
Some of the recent surge in welfare recipients was due to the economic downturn, but the number of beneficiaries has continued to grow years after the recession ended. More families today are participating in multiple programs, and they are more likely to face a poverty trap. These trends reinforce the need to reform our current welfare system because the status quo is clearly not working. Welfare programs do relieve some of the worst forms of material deprivation, but they have proven costly and ineffective. In some cases they actually make it harder for people to lift themselves out of poverty. Clearly, it is time for a change.
Administration officials proclaim the Islamic State’s isolated experiment in 7th Century Islam to pose a dire threat to America. After promising to strictly limit the military mission in Iraq, the president is preparing to expand the war to Syria, where the administration is working to overthrow the Assad government—which now blocks Islamic control over the entire country. Instead, the administration should encourage other nations, starting with Syria, to kill ISIL radicals.
Iraq is a catastrophic failure. Yet the Obama administration risks falling into war there again.
Gen. Martin E. Dempsey, chairman of the Joint Chiefs of Staff, wants to address the Islamic State “on both sides of what is essentially at this point a nonexistent border” between Iraq and Syria.
However, Washington’s intelligence capabilities in Syria remain limited. More important, the Obama administration has spent three years attempting to overthrow Syria’s Assad regime, which possesses an air defense system and warned that it would treat any attacks as “aggression.”
The administration should reconsider its policy in Syria. As I point out in Forbes online, “The Assad government is even more committed than Washington to eliminating the Islamic State as a geopolitical force.”
Yet America’s support for the opposition has weakened the Assad government’s ability to fight ISIL. Washington’s preference for less radical groups also has discouraged Damascus from targeting the Islamic State, whose existence inhibits U.S. involvement.
Reaching a modus vivendi with Damascus would encourage Assad to focus on ISIL. Assad is no friend of liberty, but Washington must set priorities.
The administration also should emphasize the responsibility of surrounding states to combat the group. For instance, Baghdad pursued a narrow sectarian course, crippling politics and the military. Iraq must reach a broader understanding with Sunnis and Kurds to strengthen internal forces against ISIL.
Ankara, which claims a position of regional leadership, has much at stake as well. The group considers Turkish lands to be part of the “caliphate.” The Islamic State’s attacks on Kurdistan could spur Kurdish refugees into Turkey.
Jordan is far more vulnerable. The Gulf States are more distant, but Sunni radicals are unlikely to leave the corrupt and licentious Sunni royals in peace.
These countries might continue their campaign to oust Assad, but they should support groups not dedicated to destabilizing the entire region. Washington should insist that the Syrian civil war is no excuse for measures which strengthen the Islamic State.
Equally important, Jordan and Turkey, both on the Islamic State’s hit list, should deploy their air forces and ground forces, if necessary, against ISIL fighters. Kurdish forces need better and more weapons, which Turkey could provide. Ankara has improved its ties with Kurdistan in recent years.
Saudi Arabia and the Gulf States have a different role to play. As Sunni states they might most usefully delegitimize ISIL’s claim of a new “caliphate.”
Even Iran can assist, though that might discomfit Washington. Tehran will support Baghdad’s Shia government irrespective of America’s preferences.
Finally, the Europeans could help provide weapons and training to the Kurds and others.
The Islamic State is evil. But its capabilities remain limited.
Rather than turn ISIL into a military priority and take America into war against the group, Washington should organize an Islamic coalition against the Islamic State. Even Gen. Dempsey called for a regional effort to “squeeze ISIS from multiple directions,” but that actually requires Washington to do less militarily.
ISIL’s rise has set in motion the very forces necessary for its defeat. Rather than hinder creation of a coalition by taking charge militarily, Washington should encourage it by stepping back. The U.S. already has gone to war twice in Iraq. There’s no reason to believe that the third time will be the charm.
Daniel J. IkensonSo Burger King plans to purchase Canadian doughnut icon Tim Hortons and move company headquarters north of the border, where corporate tax rates are as much as 15 percentage points lower than in the United States. Expect politicians at both ends of Pennsylvania Avenue to accuse Burger King of treachery, while spewing campaign-season pledges to penalize these greedy, “Benedict Arnold” companies. If the acquisition comes to fruition and ultimately involves a corporate “inversion,” consider it not a problem, but a symptom of a problem. The real problem is that U.S. policymakers inadequately grasp that we live in a globalized economy, where capital is mobile and products and services can be produced and delivered almost anywhere in the world, and where value is created by efficiently combining inputs and processes from multiple countries. Globalization means that public policies are on trial and that policymakers have to get off their duffs and compete with most every other country in the world to attract investment, which flows to the jurisdictions where it is most productive and, crucially, most welcome to be put to productive use. Too many policymakers still believe that since the United States is the world’s largest market, U.S.-headquartered companies are tethered to the U.S. economy and committed to investing, hiring, and producing in the United States, regardless of the quality of the business and policy environments. They fail to appreciate how quickly the demographics are changing or that a growing number of currently U.S.-based companies do not share their view. Perhaps too many are unaware of how the United States continues to slide in the various global rankings of attributes that attract business and investment. The leverage politicians have over America’s corporate wealth creators has diminished. Like most U.S.-based multinational corporations that face tax rates of 35 percent on profits repatriated from abroad, Apple devotes resources to navigating the maze of rules to minimize its tax burdens. Last year, Senators Carl Levin (D-MI) and John McCain (R-AZ) ripped into Apple CEO Tim Cook for his company’s efforts to reduce its taxes. Levin said: Apple sought the Holy Grail of tax avoidance. It has created offshore entities holding tens of billions of dollars, while claiming to be tax resident nowhere. We intend to highlight that gimmick and other Apple offshore tax avoidance tactics so that American working families who pay their share of taxes understand how offshore tax loopholes raise their tax burden, add to the federal deficit and ought to be closed. Unlike foreign-based multinationals whose governments don’t tax their profits earned abroad (or do so very lightly), U.S. multinationals are subject to double taxation—first at local tax rates in the foreign countries where they operate and then by the IRS, at up to 35 percent, when profits are brought home. Is it a surprise that such a system discourages profit repatriation? Who’s to blame for depriving the U.S. economy of working capital and encouraging elaborate – but legal – tax avoidance schemes? Sen. McCain at least acknowledges the faults and disincentives of the system, but then blames Apple for pursuing the interests of its shareholders anyway: I have long advocated for modernizing our broken and uncompetitive tax code, but that cannot and must not be an excuse for turning a blind eye to the highly questionable tax strategies that corporations like Apple use to avoid paying taxes in America. The proper place for the bulk of Apple’s creative energy ought to go into its innovative products and services, not in its tax department. Senators Levin, McCain, and others who prefer to strong-arm U.S. wealth creators should consider carrots instead of sticks. The United States is competing with the rest of the world to attract investment in domestic value-added activities. Companies looking to build or buy production facilities, research centers, biotechnology laboratories, hotels, or burger and doughnut joints consider a multitude of factors, including size of the market, access to appropriately skilled workers and essential material inputs, ease of customs procedures, the reliability of transportation infrastructure, legal and business transparency, and the burdens of regulatory compliance and taxes, to name a few. The capacity of the United States to continue to be a magnet for both foreign and domestic investment is largely a function of its advantages with respect to these considerations. As I noted in a paper on this subject last year: Unlike ever before, the world’s producers have a wealth of options when it comes to where and how they organize product development, production, assembly, distribution, and other functions on the continuum from product conception to consumption. As businesses look to the most productive combinations of labor and capital, to the most efficient production processes, and to the best ways of getting products and services to market, perceptions about the business environment can be determinative. In a global economy, “offshoring” is an inevitable consequence of competition. And policy improvement should be the broad, beneficial result. Combine the current tax incentive structure with stifling and redundant environmental, financial, and health and safety regulations, an out-of-control tort system that often starts with a presumption of corporate malfeasance, exploding health care costs, and costly worker’s compensation rules, the reasons more and more businesses would consider moving operations abroad permanently become obvious. Thanks to the progressive trends of globalization, liberalization, transportation, and communication, societies’ producers are no longer quite as captive to confiscatory or otherwise suffocating domestic policies. They have choices. Of course, many choose to stay, and for good reason. We are fortunate to still have the institutions, the rule of law, deep and diversified capital markets, excellent research universities, a highly skilled workforce, cultural diversity, and a society that not only tolerates but encourages dissent, and the world’s largest consumer market. Success is more likely to be achieved in an environment with those advantages. They are the ingredients of our ingenuity, our innovativeness, our willingness to take risks as entrepreneurs, and our economic success. But those advantages are eroding. According to several reputable business-perception indices, the United States has slipped considerably over the past decade in a variety of areas that directly impact investment decisions. (See “What Really Drives the Investment Decision” begininng on page 15.) Out of 142 countries assessed in the World Economic Forum’s Global Competitiveness Index, the United States ranks 24th on the quality of total infrastructure; 50th on perceptions that crony capitalism is a problem; 58th on the burden of government regulations; 58th on customs procedures; and 63rd on the extent and effect of taxation. Meanwhile, uncertainty over energy, immigration, trade, tax, and regulatory policies continues to deter investment and even encourages companies to offshore operations that might otherwise be performed in the United States. Rather than begrudge Burger King or Apple or any other profit-maximizing company for its rational business decisions, policymakers should repair the incentives that drive capital away from the United States.
Countries of the Arab Spring suffer from many economic, social, and political ills. At their center lies the unfortunate legacy of Arab Socialism, which established itself in the region during the 1950s and 1960s. One of its features, besides the ideology of Pan-Arabism and international ‘non-alignment,’ was an emphasis on government ownership and industrial planning. Far from generating prosperity and economic growth, these policies resulted in large, vastly inefficient government-operated sectors in several Arab economies. My new Cato Policy Analysis provides a sense of the magnitude of the problem and of its evolution over time:
In Egypt, for example, the share of government investment fell from around 85 percent in the late 1990s to below 40 percent in 2012. Over the same period of time, the share of government investment in Algeria doubled, from around 30 percent to above 60 percent. Throughout much of the same period, the average for lower-middle-income countries hovered under 30 percent.
Some Arab governments, most prominently Hosni Mubarak’s regime in Egypt, attempted to put in place large-scale privatization programs. However, these were perceived (and rightly so!) as attempts by the political elites and their cronies to simply seize publicly owned assets, without much regard for the future restructuring of the companies and their exposure to competition. My paper reviews the experience of privatization in other countries and tries to provide some practical lessons to policymakers in countries such as Egypt or Algeria.
First and foremost, privatization needs to be perceived as fair and transparent. Bidding should be competitive and open to a large spectrum of potential bidders, domestic and foreign. Second, private ownership of the financial sector is a requisite for successful privatization and restructuring of the rest of the economy–otherwise Arab countries risk creating a dangerous nexus of cronyism through which the state-owned banks and financial institutions would provide funding to newly privatized companies. Third, in order to avoid the danger of simply replacing government-run monopolies with privately-run ones, privatization should be far-reaching and accompanied by broad economic liberalization and opening up both to trade and investment.
Privatization is not very high on the agenda of Arab policymakers or foreign experts, and is typically eclipsed by the more immediate political concerns about the region. It is not, however, an issue that can be simply ignored.
It is a mistake to think that economic reforms can wait until Middle Eastern countries address their internal political and economic problems. There are not many examples of countries that have transitioned successfully to a representative constitutional government while maintaining economic rules that deny opportunity to large segments of the population. State ownership, accompanied by regulations that favor existing state-owned incumbents, are a critical part of the problem facing countries in the MENA region, most notably Egypt, Libya, Algeria, Syria, and Yemen
I don’t follow domestic regulation as closely as many people at Cato, but I keep an eye on it in relation to “regulatory trade barriers” that are being addressed in trade negotiations. In that context, I came accross this EU attempt to crack down on high-wattage vacuum cleaners:
Consumers are being urged to buy powerful vacuum cleaners while they can after it emerged that some of the most powerful models on the market will disappear in September when a new EU rule comes into force.
An EU energy label, to be introduced from 1 September, means manufacturers will not be able to make or import vacuum cleaners with a motor that exceeds 1,600 watts.
European commission spokeswoman for energy Marlene Holzner said in a blog: “As a result of the new EU eco-design and labelling regulations, consumers will also get better vacuum cleaners. In the past, there was no legislation on vacuum cleaners and companies could sell poorly performing vacuum cleaners.”
Oh, the humanity! Companies might sell “poorly performing vacuum cleaners” to an unsuspecting public! And only legislation can save the day!
Or – and I know this might sound crazy to some people – we could just rely on consumers to evaluate the vacuum cleaners, buying the better ones and leaving the “poorly peforming” ones on the shelf.
The British burned Washington 200 years ago today. In the Washington Post Joel Achenbach, with help from Steve Vogel, author of Through the Perilous Fight, tells how the day went, including this description of how thorough and careful the British were:
The British knew how to build a bonfire. You just stacked the furniture, sprinkled it with gunpowder and put a torch to it.
They built multiple fires inside the Capitol, immolating the Supreme Court, the Library of Congress and the splendid chambers of the House and Senate.
Later in the evening, Ross and Cockburn made their way to the White House and helped themselves, amid hearty toasts, to the fabulous meal and adult beverages left by Mrs. Madison and her staff. They took a few souvenirs, and one filthy lieutenant ventured into the president’s dressing room and put on one of the president’s clean linen shirts.
Then they set the fires. Up in flames went some of the most beautiful furniture in the country, including pieces obtained by Jefferson in Paris and the private possessions of the Madisons. The fires left the mansion a gutted, smoldering shell.
The British also burned the Treasury building, and the building housing the War and State departments. They ransacked the National Intelligencer newspaper office, with Cockburn ordering the seizure of all the letter C’s from the presses so that the editor could no longer write nasty things about him. The Americans themselves burned the Navy Yard to keep the ships and stores out of British hands.
The invaders spared private dwellings. This was to be a civilized sacking; no rapes, no murders, minimal plundering. They even spared the Patent Office after being persuaded that patents were private property.
One would hate to think that the British army was more respectful of private property rights than the current U.S. government.
To ensure that public discussion remains “uninhibited, robust, and wide-open,” the First Amendment protects speech that is “vituperative, abusive, and inexact.” While nobody will argue that Anthony Elonis’s speech—the subject of a Supreme Court case this coming term—was anything but “vituperative, abusive, and inexact,” there is considerable disagreement over whether his speech should be protected by the First Amendment.
Elonis’s chosen form of speech was a series of rap lyrics he posted on Facebook under the pseudonym “Tone Dougie.” Many of the lyrics were violent and lurid, and some of those violent images were made in reference to Elonis’s estranged wife, who took them as a threat to her life. As a result of his crude posts, Elonis was fired, his wife obtained a protective order against him, and he was arrested and charged with violating 18 U.S.C. § 875(c), which makes it a federal crime to transmit in interstate commerce “any communication containing any threat to injure the person of another.”
Elonis argued that his rap lyrics were an artistic expression and that because he did not intend them to be a threat, his speech should be protected. The federal district court hearing his case didn’t see it that way. The judge rejected his request that the jury be instructed to consider his actions based on whether he expressed a subjective intent to threaten and instead instructed the jury to judge his speech based on whether a reasonable person would have interpreted the lyrics as a serious expression of intent to inflict bodily injury. Elonis was thus convicted and the U.S. Court of Appeals for the Third Circuit also rejected his argument that a subjective intent to threaten is required before speech loses First Amendment protection.
Now before the Supreme Court, Cato has joined the American Civil Liberties Union, the Abrams Institute for Freedom of Expression at Yale Law School, the Center for Democracy & Technology, and the National Coalition Against Censorship on a brief supporting Elonis’s position. We argue that Supreme Court precedent shows that (1) a subjective intent to threaten is an essential element of a “true threat,” (2) requiring a finding of subjective intent is in line with First Amendment principles, and (3) drawing the line between threat and protected speech carefully is particularly important given the rise of the Internet as a forum of communication—one where it can be easy to take things out of context.
As a matter of most people’s taste, the Internet may well be better off without violent rap lyrics like Anthony Elonis’s. But that shouldn’t matter to this case or how it’s analyzed under the First Amendment, which requires a high standard of proof regarding incitement or threats of violence before individuals can be jailed for their speech. The Supreme Court should take this opportunity to speak that truth freely across all mediums.
Elonis v. United States will be argued at the Supreme Court in November or December.
This blogpost was co-authored by Cato legal associate Julio Colomba.
Christopher A. Preble
Over at Reason today, I have more to say (beyond here and here) about recent goings on in Iraq and Syria, and the debate over what, if anything, the United States might have done, or might do now, to change things.
As I note:
some commentators insist that the current chaos is a direct result of President Obama’s reluctance to intervene decisively in the multi-year conflicts in Iraq and Syria. Most notably, Obama’s own former Secretary of State, Hillary Clinton, in an interview with The Atlantic’s Jeffrey Goldberg, suggested that Obama’s failure to aid the Syrian rebels led to the rise of [the Islamic State in Iraq and the Levant (ISIL).
Clinton claims “that the failure to help build up a credible fighting force of the people who were the originators of the protests against Assad … left a big vacuum, which the jihadists have now filled.” Inherent in that statement is the belief that there was a cadre of relatively liberal-minded opponents of Bashar al-Assad’s regime inside of Syria, and that American support would have been the decisive factor in ensuring that they would triumph over both Assad and the ISIL extremists. By this logic, if the United States had chosen to arm the “correct” anti-Assad rebels in Syria, we would not now be bombing ISIL in Iraq.
But experts, including George Washington University’s Marc Lynch, aren’t so sure. Others question how “moderate” some of the so-called moderates really are. Indeed, many so-called moderates, in turns out, are just “Caliphate, later” people. That is, unlike their “Caliphate, now” brethren, they are willing to use U.S. support to overthrow Assad. Once his regime is defeated, however, many will fight to implement an extremist government, one that is likely to be a thorn in the side of their regional neighbors, as well as the United States. That explains, in part, why we are now fighting in Iraq at least some of the people who we trained in Syria, And yet, the interventionist bias—do something—remains pervasive inside the Washington Beltway.
Ironically, many of the same people who are skeptical of government intervention to deal with domestic problems seem to believe that that same government can somehow cure the ills of other nations. This cognitive dissonance reflects what Michael Munger calls a “unicorn” government: “a State that has the properties, motivations, knowledge, and abilities that they can imagine for it.”
Even if the advocates for U.S. military intervention—on both the left and the right—find that magical, mystical state, they must also show that the problem in question can’t be handled by others, or by nonmilitary means. Just because we have the ability to do something doesn’t mean that we should, or must, do it, nor does it mean that military intervention would improve the situation.
Here, again, some on the right have departed dramatically from their intellectual forefathers who advised that “masterly inactivity” is often preferable to action for action’s sake. Calvin Coolidge advised against the impulse to preemptively deal with any possible problem, no matter how distant. “If you see ten troubles coming down the road, you can be sure that nine will run into the ditch before they reach you and you have to battle with only one of them.”
This is particularly sage advice for the United States, a nation with blessed geography and great wealth, and one that has a robust nuclear arsenal and an unrivaled military that is sufficient to deter any nation wishing to attack us directly. Thus the burden of proof for U.S. military intervention should fall on those making the case for action, not those advising against.
So far at least, that doesn’t seem to be the case. The interventionists are still winning.
Philadelphia’s government schools are in the midst of a financial crisis and anti–school choice activists think they found the perfect scapegoat.
Earlier this week, the group Americans United (AU) attacked Pennsylvania’s scholarship tax credit program, claiming that it was partially responsible for Philadelphia’s budget woes.
For the second year in a row Philadelphia’s public schools are struggling to open on time, and it appears deep budget cuts—including money siphoned for a voucher-like program—are to blame. … That’s why it’s important to remember that when voucher [sic] programs expand, it often comes at the expense of public schools.
Curiously, in a post of more than 650 words about Philly’s school funding fiasco, the AU blogger could not find space to mention how much Philadelphia actually spends per pupil. Perhaps that’s because citizens are far less sympathetic to claims of school underfunding when they learn how much is already being spent. Consistent with previous studies, a recent Education Next survey found that support for increasing government school spending dropped from 63% to 43% when respondents were first told how much the schools currently spend.
Philadelphia’s schools are well-funded compared to the national and state averages. As Andrew J. Coulson observed last September, the Philly school district spent nearly $16,000 per pupil in 2013-14, which is about $3,000 above the national average and about $1,000 more than Pennsylvania’s statewide average. It’s even $1,600 more than in-state tuition at Temple University. The $32 million budget cut that AU laments is only about 1% of the city’s $3.03 billion budget (p. 54). Moreover, that “cut” came entirely from temporary stimulus funds that had expired.
The AU blogger also does not offer an explanation for how the Educational Improvement Tax Credit (EITC) supposedly harms government schools. The EITC grants tax credits worth 75% to 90% of corporate donations to nonprofit scholarship organizations that help low- and middle-income families select the schools of their choice. The scholarships averaged only $990 in 2011-12, which is barely 6% of Philadelphia’s per pupil expenditures. Scholarship organizations can use up to 20% of the donations they receive for administrative purposes, so even assuming that every organization used the maximum administrative allowance (though a 2010 state report [p. 33] put the average at 8%), that’s still only $1,237.5 per pupil. Even assuming that every donor received the maximum 90% credit, the EITC reduces revenue by only $1,113.75 per pupil, which is still only about 7% of what Philly spends per pupil.
A 2014 report by the Show-Me Institute estimated that if every scholarship recipient were to re-enter the government school system, it would cost Pennsylvania an additional $826 million per year. If all 59,218 scholarship recipients would have attended private school anyway, then the state is forgoing about $66 million in revenue under the extremely conservative assumptions above. However, given that the average scholarship family’s annual income is only $29,000 (p. 31), the actual number of students who would have attended private school anyway is likely quite low—certainly far lower than 93%, which is the breakeven point.
In other words, the EITC saves a significant amount of money statewide. The AU needs to find another scapegoat.
They also need to find a new champion—though they railed against Gov. Tom Corbett for supporting the EITC, his electoral opponent Tom Wolf supports it as well, calling it “an effective tool to invest in education and support student learning in a multitude of educational settings.”
So what’s driving Philly’s budget woes? The same growth mismanagement plaguing Pennsylvania statewide:Pennsylvania public school spending has rapidly increased despite declining enrollment, with little growth in academic achievement to show for it. Since the 2000-01 school year, public school spending has risen 71 percent, from $15.3 billion to $26.1 billion (not adjusted for inflation) in the 2010-11 school year. Over that time, enrollment in Pennsylvania public schools declined by 1 percent, or 22,537 students (from 1,799,691 to 1,777,154), while schools have hired an additional 32,937 more employees, or an increase of 26 percent (from 123,231 to 156,168).
Philly is also spending a lot more on many fewer students. A new Commonwealth Foundation report shows that the Philadelphia school district’s per pupil expenditures increased 21% in inflation-adjusted dollars from 2002-03 to 2012-13, while enrollment fell 25% over the same time period.
Had Philadelphia’s spending merely kept pace with inflation, it would be spending half a billion dollars less today. That would be enough to give all 137,674 students in Philadelphia’s government schools a scholarship of $3,632 to attend the school of their choice, more than 3.5 times the average EITC scholarship. Plus, there would be $2.5 billion left over to run empty schools.
After engaging in a racially motivated street fight with a black man, Charles Cannon found himself facing—as expected—assault charges and a sentencing enhancement to penalize him further under Texas’s hate crime law. To federal prosecutors, however, this was not good enough, so they charged Cannon under the federal Hate Crimes Prevention Act (HCPA). You see, they had to make a federal case out of a fistfight to stop the return of slavery.
If that sounds odd, it probably should. The HCPA was passed pursuant to Section 2 of the Thirteenth Amendment, which authorizes Congress to enforce the Thirteenth Amendment ban on slavery, which authority the Supreme Court has extended to eliminating the “badges and incidents” of slavery. Defining these “badges and incidents” is naturally left up to Congress, and Congress has determined that racially motivated violence fits into that ever-expanding category. Cannon challenged his HCPA charges, but the federal district and appeals courts upheld the HCPA’s constitutionality, deferring to Congress’s power to “rationally determine” what the badges and incidents of slavery entail.
In petitioning the Supreme Court for review, Cannon argues that the HCPA intrudes on the states’ police power to prosecute local crimes and that Congress can’t be the judge of the limits of its own powers, whether under the Thirteenth Amendment or otherwise. Joined by the Reason Foundation and the Individual Rights Foundation, Cato has filed a brief supporting Cannon’s petition. We argue that the use of hate-crime laws to sweep local criminal activity into federal court has nothing to do with stamping out slavery and that the Court should decide the legitimacy of these laws before a more highly politicized case comes along—Ferguson, anyone?—and makes that task even harder.
Not only are federal hate crime laws constitutionally unsound, but, as George Zimmerman’s trial over the death of Trayvon Martin highlighted, they invite people dissatisfied with a state court outcome to demand that the federal government retry unpopular defendants. Giving Congress unlimited power and impairing the fundamental right to be free from double prosecution are too high and too immediate a price to pay to combat the phantom menace of slavery’s return to the United States.
This blogpost, as well as Cato’s brief, was co-authored by legal associate Julio Colomba.
Concerned about low voter turnout, the Los Angeles Ethics Commission has floated the idea of using “financial incentives, such as a lottery system” to lure the apathetic to the polls. The Los Angeles Times has the details, while columnist Debra Saunders weighs in with critical commentary here and here. From Saunders’s second post:
Total prize money is expected to be $100,000, or 1 percent of the $10 mil Los Angeles spent on public financing last year. … While the commission was thinking of giving away 100 $1,000 prizes, [City Councilman Herb] Wesson suggested that the panel consider a bigger takeaway – say a $50,000 prize, and two for $25,000. The measure hasn’t even made it to a City Council vote, and already politicians are trying to figure out how to fatten the prize.
Lottery tickets, paying off in other people’s money, as a reward for voting. That’s a perfect metaphor for the political process, isn’t it?
Would Linda Greenhouse Apply the Same Interpretive Method She Uses in Halbig to Habeas Corpus Cases?
Michael F. Cannon
Yale law professor Linda Greenhouse is a former New York Times Supreme Court correspondent and now writes a legal column for the Times. Today, she writes about Halbig v. Burwell. For my latest on Halbig and similar cases, see here. Now Greenhouse, who argues these cases are just about gutting the Patient Protection and Affordable Care Act:
To be clear, I’m not suggesting that there is anything wrong with turning to the courts to achieve what politics won’t deliver; we all know that litigation is politics by other means. (Think school desegregation. Think reproductive rights. Think, perhaps, same-sex marriage.) Nor is the creativity and determination of the Affordable Care Act’s opponents any great revelation — not after they came within a hairsbreadth of getting the law’s individual mandate thrown out on a constitutional theory that would have been laughed out of court not too many years ago.
Boy, are they ever determined.
I accept the compliment, with one proviso. The stakes in the Halbig cases are much bigger than the PPACA. The IRS is subjecting those plaintiffs to taxes from which, as Greenhouse implicitly admits, the operative language of the statute would exempt them. The plaintiffs have a right not to be taxed unless Congress expressly grants the IRS that power. A federal judge whom Greenhouse respects (Thomas Griffith) surveyed the IRS’s rationales for subjecting tens of millions of Americans to those taxes, found those rationales to be meritless, and essentially ruled that the IRS is violating the law on a massive scale. If preventing the executive branch from exceeding its lawful powers is just “politics by other means,” then so are the habeas corpus cases Greenhouse approvingly cites.
Unfortunately, when Greenhouse takes the government’s side in Halbig, it seems to be on the basis that, “Of course there are ambiguities and inconsistencies in a 900-page bill that never went to a conference committee for a final stitching together of its many provisions.” That probably is true, but it does not follow that the statute is ambiguous or inconsistent with regard to the question presented in Halbig. The government certainly has asserted such ambiguities and inconsistencies exist. Yet a closer look at the government’s arguments shows that the specific provisions it cites are all quite consistent with the language authorizing subsidies only to those who buy coverage “through an Exchange established by the State.”
Greenhouse also commits an error as well as her own inconsistency. She claims the phrase “through an Exchange established by the State” appears only once in the subsidy-eligibility rules. In fact, it appears explicity twice: one mention appeared in the first draft of those rules; Senate Democrats added the second just before final Senate passage (which all by itself suggests they knew exactly what they were doing). Moreover, that phrase appears seven more times by cross-reference. And the subsidy-eligibility rules do not use any other language – at all – to describe the Exchanges through which the law authorizes subsidies. All of which evince a clear meaning and purpose: to offer subsidies only in states that comply with Congress’ desire that they should establish Exchanges.
Greenhouse’s inconsistency occurs when she (incorrectly) claims, “the two [Halbig] judges trained a laser focus on a single section, indeed on a single word, in the massive statute…ignor[ing] the broader context, in which Congress clearly intended to make insurance affordable[.]” The habeas corpus cases with which Greenhouse apparently agrees also focused on a single phrase – one could argue, a single word – in the Constitution. Would she criticize those cases for failing to uphold the overarching purpose of the Constitution – which appears right there in the preamble – to “insure domestic Tranquillity” and “provide for the common defense”?
I wrote Greenhouse to thank her for her column, which was far more respectful and gracious than many Halbig critics have been. I thought it might be fruitful to offer to debate these cases with her. She respectfully declined, but noted there is a movement afoot to bring my coauthor Jonathan Adler to New Haven for that purpose. Watch this space for development.
Reading through this Newsweek article on the troubled relations between police and residents in Ferguson, Mo. before this month’s blowup, this passage jumped out at me:
“Despite Ferguson’s relative poverty, fines and court fees comprise the second largest source of revenue for the city, a total of 2,635,400,” according to the ArchCity Defenders report. And in 2013, the Ferguson Municipal Court issued 24,532 arrest warrants and 12,018 cases, “or about 3 warrants and 1.5 cases per household.”
My first reaction – maybe yours too – was “is that a misprint?” Three arrest warrants per household in Ferguson last year?
Now let’s stipulate that some of those warrants were written against out-of-towners, especially in matters arising from traffic offenses, tickets being a key revenue source for many municipalities in St. Louis’s North County. Yet here’s a second statistic some will find surprising: while reported property-crime rates in Ferguson have run well above the national average for years, violent-crime rates have not. After a high period that lasted through 2008, they have declined steadily to a point where last year Ferguson had about the same rate of violent crime as the nation generally.
What seems clear at this point is that Ferguson – while in some ways a nicer and safer town than some have imagined – does suffer from a unusual degree of antagonism between police and residents, an antagonism that crucially involves race (the town is an extreme outlier in its now-famous extent of black underrepresentation in elected office) and yet has other vital dimensions as well. The town gets nearly a quarter of its municipal revenue from court fees – the figure in some neighboring towns is even higher – and according to the ArchCity Defenders report quoted in Newsweek, Ferguson’s municipal court is among the very worst in the way it adds its own hassle factor to the collection of petty fines:
ArchCity Defenders, which has tracked ticketing of St. Louis area residents for five years and focused primarily on vehicle violations, started a court-watching program because so many of its clients complained of traffic prosecution wreaking havoc on their lives. Defendants routinely alleged that a racially-motivated traffic stop led to their being jailed due to inability to pay traffic fines, which in turn prompted people to “los[e] jobs and housing as a result of the incarceration.” … One resident quoted in the study said, “It’s ridiculous how these small municipalities make their lifeline off the blood of the people who drive through the area.”
Racial antagonism between residents and law enforcement is bad no matter what, but it’s worse when residents wind up interacting constantly with law enforcement because of a culture of petty fines. (If you doubt that law enforcement in Ferguson has been touched by a culture of petty fines, read this Daily Beast account of how the town sought to charge a jail inmate for property damage for bleeding on its officers’ uniforms – even though the altercation with jailers arose after the town had picked up the wrong guy on a warrant issued on a common name.)
In recent years scholars and journalists have been developing a literature on how petty fines and low-level law enforcement can snowball into life-changing consequences for persons not by nature inclined toward criminality – recent entries include On the Run: Fugitive Life in an American City by Alice Goffman (“web of warrants”) and The New Jim Crow by Michelle Alexander (“a devastating account of a legal system doing its job perfectly well”). Libertarians have participated actively in this literature, especially through the work of Radley Balko, and in June I brought together some links from Cato and Overlawyered in connection with a Cato podcast.
It seems so random and meaningless that a legal offense as minor as walking on the roadway would set in motion what was to prove the fatal confrontation between officer Darren Wilson and Michael Brown. But in the wider scheme of how Ferguson came to have its problem with policing, it may be neither random nor meaningless.
What If We Applied the IRS's Reasoning in Halbig & King to the Patriot Act or RFRA, Instead of the ACA?
Michael F. Cannon
Over at Darwin’s Fool, I posted a critique of the Fourth Circuit’s opinion in King v. Burwell. Unlike the D.C. Circuit’s ruling in Halbig v. Burwell, the Fourth Circuit held that the IRS has the authority to issue subsidies in states with federal exchanges, despite the fact that the Patient Protection and Affordable Care Act repeatedly says subsidy recipients must enroll in coverage “through an Exchange established by the State.” I reproduce here my response to a commenter to that post, as his argument parallels those of many others who have been critical of the Obamacare challenges.
My commenter objected that a plain-text reading “must include the entire text of the bill,” which “makes clear that the goal of the bill was to provide health care to all Americans who needed it and could not, at that time get it.” Moreover, “It would be illogical for Congress to establish a national health care system that is based on subsidies and then not include those subsidies in all aspects,” thus “it is entirely reasonable to interpret that one sentence to mean that Congress intended the subsidies for all participants.” My reply:
Sir, I’m afraid you have things exactly backward.
The overall context of the PPACA presents no difficulty for the plaintiffs in King v. Burwell, Halbig v. Burwell, or the other cases challenging subsidies in federal exchanges. The text of the eligibility rules for those subsidies clearly and repeatedly limit eligibility to those who enroll in coverage “through an Exchange established by the State.” There is nothing in the broader context of the statute to suggest that Congress understood the words “established by the State” to have any meaning other than their usual meaning. There isn’t even any statutory language that conflicts with that plain meaning. Jonathan Adler and I addressed (almost) all of these supposed anomalies here.
On the contrary, it is the Obama administration and its supporters for whom both the text and context present difficulties. (We can no longer call them supporters of the PPACA, given how adamantly opposed they are to implementing the law as Congress intended.) The subsidy-eligibility rules are the only place where Congress spoke directly to the question at issue. Those rules flatly contradict the administration’s position. Congress did not throw the phrase “established by the State” around loosely. They referred to exchanges “established by the State” when they meant exchanges established by the states. They referred generically to “an Exchange” when they meant either a state-established or a federal exchange. And they referred to state-established and federally established exchanges separately within a single provision, which shows they saw a difference between the two. Congress also did the exact same thing – withholding subsidies from residents of uncooperative states – in the PPACA’s other massive new entitlement program, the Medicaid expansion." title="<--break-->">
I somehow doubt you or anyone who supports the PPACA’s overarching goal would be comfortable with federal courts adopting a rule that a statute’s purpose should trump the precise means Congress chose to advance that purpose. The PATRIOT Act’s ostensible purpose was to protect Americans from terrorism. Should the president be allowed to do whatever advances that goal, even if his actions exceed the limits Congress placed on the powers created by that statute? The purpose of the Religious Freedom Restoration Act is to protect the freedoms of conscience and exercise of religion. Does that mean courts should interpret the RFRA to allow anyone with a religious objection to opt out of not just the PPACA’s individual mandate, but the statute in its entirety? Should courts allow those with religious objections to opt out of paying taxes?
The problem with your method of statutory interpretation is that Congress never legislates with only one purpose in mind. If it did, then the Occupation Safety and Health Act of 1970 would have devoted 100 percent of U.S. GDP, and conscripted every U.S. resident, to the cause of occupational safety and health – for exactly two days, at which point the Clean Air Act of 1970 would have devoted the nation’s entire stock of human, financial, and physical capital to the cause of clean air. When Congress enacted the PPACA, its purposes included subsidizing health insurance, having states establish and operate exchanges, and using the former as an inducement to the latter. Your recommendation that the executive and the judiciary should vitiate the clear, repeated, and uncontradicted terms of the statute in the name of just one of the legislative branch’s purposes would ironically frustrate Congress’ purpose, not advance it.
Lots more on King, Halbig, and other cases challenging those illegal subsidies, etc., here.
Michael F. Cannon
The Patient Protection and Affordable Care Act’s Independent Payment Advisory Board has been called a “death panel,” though I’ve argued one could just as legitimately call it a “life panel.” Either way, it is the most absurdly unconstitutional part of the PPACA.
Adler’s otherwise excellent summary neglects to mention IPAB’s most unconstitutional feature. Diane Cohen and I describe it here:
The Act requires the Secretary of Health and Human Services to implement [IPAB’s] legislative proposals without regard for congressional or presidential approval. Congress may only stop IPAB from issuing self-executing legislative proposals if three-fifths of all sworn members of Congress pass a joint resolution to dissolve IPAB during a short window in 2017. Even then, IPAB’s enabling statute dictates the terms of its own repeal, and it continues to grant IPAB the power to legislate for six months after Congress repeals it. If Congress fails to repeal IPAB through this process, then Congress can never again alter or reject IPAB’s proposals…
Congress may amend or reject IPAB proposals, subject to stringent limitations, but only from 2015 through 2019. If Congress fails to repeal IPAB in 2017, then after 2019, IPAB may legislate without any congressional interference.
Like I said, absurdly unconstitutional. But that’s ObamaCare for you.