Relevant and even prescient commentary on news, politics and the economy.

My ACA-Individual-Mandate Analysis Summed Up In Three Paragraphs**

As AB readers know, I’ve written quite a number of in-depth posts on the ACA litigation—on the individual-mandate provision and on other issues as well.  (The number, by my count, is at least 11,** including the one I posted yesterday, titled “Showtime At The Supreme Court”).  And for your reading enjoyment, and in honor the big show that will be staged at the Court during the next three days, I’m posting the links to all 10** of the earlier posts I located, below. 

But in response to a comment by Coberly to “Showtime” post today, I summed up my analysis of the individual-mandate issue in three paragraphs.  Coberly wrote:

Why, is there nothing then you can’t do in the name of the commerce clause?

Or is it a mystery known only to those who “actually know the law,” as opposed to those of us who worry about little things like civil liberties as they are actually experienced by, say, human beings?

I responded:

There are limits to what Congress can do in the name of the Commerce Clause, but because medical treatment for uninsured patients, including those traveling from one state to another, requires cost-shifting of huge amounts of money, some of it interstate, a law like the ACA is within the Commerce Clause limits. 

That’s not to say that there may not be some other reason why a statute that falls within Congress’s Commerce Clause powers is unconstitutional, and although the people challenging the constitutionality of the mandate don’t expressly say this, their “freedom” and “liberty” claim is really a claim that the mandate violates the Fifth Amendment’s due process clause under a constitutional-law doctrine known as “substantive due process.” (That doctrine also is the legal doctrine under which the Supreme Court ruled that states can’t bar the sale and use of contraceptives, and is the doctrine underpinning Roe v. Wade and Lawrence v. Texas, the opinion that struck down state sodomy laws as unconstitutional.)  But the Commerce Clause plays no role in this, one way or another. 

Sure, if the Court strikes down as beyond Congress’s authority  under the Commerce Clause a statute that requires people to do something or that bars them from doing something, then people are “free” to do or not do whatever the statute required or barred.  But that’s just incidental.  It isn’t less of an imposition on liberty for Congress to require people who can afford to do so to buy health insurance directly through the government by a tax under Congress’s taxing power (which is what the government does with Medicare) than to require then to buy it elsewhere under Congress’s Commerce Clause power.

Here are the links to the nine earlier ACA-litigation-related posts I was about to find:

*Actually, as Linda Greenhouse pointed out in her NYT column on Thursday, which I discussed in my post yesterday, it isn’t 26 state attorneys general.  It’s 22 Republican state attorneys general and four Republican governors whose states have Democratic attorneys general.

**I added this one to the list after I posted this post earlier today.

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Health care thoughts: First major rewrite of the Americans with Disabilities Act

by Tom aka Rusty Rustbelt

 While We Were Busy Discussing Other Things….

 …. the first major rewrite of regulations for the Americans with Disabilities Act went into effect March 15th. Good news and bad news for workers and employers.

 Overall, what I read looks achievable from an employer viewpoint, and the Obama administration has shown some common sense (building owners who spent money to meet the prior rules will not have to immediately tear up their buildings for modifications to meet new rules).

The bad news? The news regs for public swimming pools cannot not be met on time, and the administration has issued a 60 day reprieve to prevent the closer of most of the pools in the country. (Apparently there is not enough qualified equipment or enough service techs to retrofit tens of thousands of pools in any timely manner.) Eventually the administration may inadvertently shut down many of the therapy pools used by …. the disabled.

The other bad news I see is the definition of “disabled” is now murky again, after the feds and employers and the courts worked for two decades to clarify the previous definitions. This murkiness puts employers acting in good faith in jeopardy for litigation.

This will be progress if applied with common sense.

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Showtime At The Supreme Court

Dan emailed me several days ago asking whether I thought I should write a preshow (my word, not his) post about next week’s marathon Supreme Court oral arguments on the constitutionality of Obamacare, a.k.a., the Affordable Care Act.  Six hours of argument, two each day, Monday through Wednesday, in which the Court will hear argument, first, on whether the courts even have “jurisdiction” (the legal authority) to even consider the challenges to the Act’s constitutionality before the challenged provisions of the Act have gone into effect, and, then, on the challenges to separate parts of the Act by various challengers who will be directly affected by the respective provision. 

It promises to be a long three days.  And by the time Dan emailed me, I already was sick of reading previews.  I wrote back to Dan:

I don’t think there’s anything to say, really, at this point.  There’ve been a zillion articles/commentaries about it within the last week or so, but they don’t really say anything.  Mostly they just kind of speculate about how Roberts, Scalia and Kennedy might vote, based on things like what Scalia wrote in a concurring opinion in a Commerce Clause case a few years ago (Scalia expressed an “expansive” view of Congress’s Commerce Clause powers), and how Roberts wants to be remembered. It’s obligatory writing for people like Adam Liptak, the NYT Supreme Court correspondent, but pretty pointless, really.

But two articles published on Thursday, one by former (longtime) New York Times Supreme Court correspondent Linda Greenhouse, who in retirement writes a periodic commentary column in the Times, and Slate Supreme Court and general-legal-issues writer Dahlia Lithwick, are, I think, worth reading. 

Greenhouse’s is titled “Never Before,” and the thrust of her article is that those two words—“never before”—are the sum and the (non)legal substance of the challengers’ arguments.  “Unprecedented,” she notes, “is a description, not an analysis.”  Or a legal argument.  It is instead merely a political argument.  And transparently so, which is why she predicts that the Court will uphold the statute, by a comfortable margin. 

Well, actually, she predicts that the Court will uphold the statute by a comfortable margin because, well, for all the incessant hype, this is not, under extensive and pretty darn clear Supreme Court precedent relevant to each of the separate stated constitutional grounds argued, a close case at all—and because John Roberts cares a lot about how the Court is perceived during his tenure as its chief. 

Or, more accurately, at least in my opinion, because under Supreme Court precedent this is not a close case and  this is too high-profile a case for its outcome not to impact the public’s perception of the Court.  By which I mean, and I think she means, that while Roberts & Co. regularly make out like bandits in the night, hijacking the law and transforming it into reflection of a 1980s Federalist Society checklist, they do so only to the extent to which they expect that they can escape widespread public revulsion.  Which in turn is determined by the extent to which the news media actually focuses on these ideological-agenda rulings before the Court issues the ruling.  

That, after all, is how we got Citizens United v. FEC.  Roberts & Co. misjudged.  Oops.  Well, for heaven’s sake … I mean … y’know … who knew that the public would, um, actually get the Citizens United ruling?

Lithwick’s article makes much the same point as Greenhouse’s—that as a matter of law, this is not a close case—but with a slight twist.  After giving a nod of recognition to the Greenhouse , which was published in that morning’s paper, Lithwick says that while she expects that the Court will uphold the statute, she’s not all that sure.  As a legal matter, she says, this case is not the case of the century nor of the decade nor even of this term.  Unless, of course, a 5-4 majority surprises almost all the legal commentators who actually know the law and follow the Court.   

Which, she says, wouldn’t surprise her all that much, because the case is not really about the law at all, but instead about “optics, politics, and public opinion.”  But ultimately, she thinks, Roberts and one or two of the others just won’t think this case is worth the cost in public opinion. 

I agree.  It’s not as if they get to pick a president in this one.  There are, as Lithwick notes, other cases in their pipeline that could well do that. The oral arguments in those cases are, like the arguments next week, likely to be mere shows.  But with a more limited-release audience and opposite results.

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World Trade

Mark J. Perry reports on the latest world trade data from The CPB Netherlands Bureau for Economic Policy Analysis.  He presents a graph from 2000 on showing that the levels of world trade and world industrial output have both reached new post-recovery highs.

He takes this to be very good news, and draws some broad conclusions.

Bottom Line: Both world trade volume and world industrial output reached fresh record monthly high levels in January. Trade and output are now far above their pre-recession levels, providing evidence that the global economy has made a complete recovery from the 2008-2009 recession. For the U.S., the annual growth rates for exports (10%) and industrial output (3.5%) reflect the underlying strength in America’s manufacturing sector.

The graph tells me rather a different story.  I went to the source, got the raw data back to 1991, and made my own graph.

It’s true that there has been a V-shaped recovery from the staggering decline that occurred during the 2008 financial crisis.  It’s also true that there is a new post-recovery high.  But I tend to look at graphs of time series data in terms of trends, and have decorated the graph accordingly.

The green straight line is a lower trend line boundary, approximately connecting all the dips.  The yellow straight line is an upper trend line boundary, connecting the tops.  The purple line is an exponential best fit through the peaks, indicated with purple dots.  Of course, in a finite universe, an exponential trend must eventually end.  Even a straight line expanding envelope probably can’t go on forever. 

Now, it looks as if there might be a new top limit to growth.  The red line connects the top just before the crash with the new top that Mr. Perry finds so exciting.   If this holds, then going forward the data will be contained in a collapsing envelope.

Here’s a close up view of the crash and recovery.  I’ve added some purple lines connecting detail level peaks during the recovery.

The purple lines appear to be approaching the red line as an asymptote.  Alternatively, the metric these points represent might be rolling over and approaching another decline.  Either way, there is a clear loss of momentum as the recovery ages. 

I don’t have a crystal ball, and  I’m not going to make a prediction about the future of world trade. But it’s clear that the historical trends no longer apply, and I do not share Mr. Perry’s optimism.

Cross-posted at Retirement Blues.

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Consensus among economists ?

Dan here…. Jonathon Chait writes in the NYT Paul Ryan: Obama Refuses to Endorse Tax Fairy. Lifted from Robert’s Stochastic Thoughts on journalistic rhetorical language and consensus:

on Chait

there’s not really a growing consensus that tax reform is good. The consensus has existed among economists forever

where he defines tax reform as closing tax deductions and loopholes and lowering rates.

I comment

Consensus among economists ? You must be joking. I am an economist and I absolutely oppose lowering rates whether or not loopholes are eliminated. As to loopholes, well it depends. Should we eliminate the mortgage interest deduction ? Sure (but not yet — and not quickly — low housing investment is a problem now). The deduction for charitable contributions not so much. Tax employer provided health insurance when the Republicans stop trying to kill Obamacare (that is on the first of never). Eliminate the R&D tax credit ? Why ? Are you nuts ? Eliminate the investment tax credit ? Why tax reinvested profits at all ?
No one likes tax expenditures in the abstract (as almost everyone dislikes high government spending in the abstract). It is impossible to get a consensus once one discusses which deductions to eliminate (Chait went on to note this in the post).

Chait has long supported broadening the base and lowering rates (he was a passionate enthusiast for the 1986 tax reform). The economists who basically agree with Paul Ryan have long supported tax reform. Most non Randian economists do to. But many of us don’t.

If you want to claim there is a consensus, show me a poll. Also one on just what should capital gains tax rates, tax treatment of capital income and top income tax rates. On the second set of questions, I am willing to bet a small amount of money at even odds that most members of the American Economic Association disagree with Ryan about the direction in which policy should change.

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Bankrupt Rhetoric

Peter Dorman at Econospeak comments:

 Bankrupt Rhetoric

 I woke up this morning to Paul Ryan, describing his budget proposal, as quoted in the New York Times: “This is about putting an end to empty promises from a bankrupt government.”

Bankrupt government? Let’s consider this more closely. The normal meaning of bankrupt is negative net worth, as when your liabilities exceed your assets. By this standard, the US government is hardly bankrupt, since it has enormous hard assets and an even larger soft one, the legal right to tax the income, transactions and property of all individuals and organizations subject to US law. We should all be so bankrupt!

So I guess Ryan is not using the normal business meaning of the word. Perhaps for him bankrupt means having negative earnings over some period of time. Here is the federal government’s fiscal record since 1929:

So during what periods has the federal government been “bankrupt”? During every year when outlays exceeded revenues? That would include nearly all of modern history since the 1960s. Or when the fiscal deficit exceeded, say, 5% of GDP? That’s a smaller time frame—basically the past few years since the financial crisis hit and WWII. But if the government is bankrupt now, how bankrupt was it in the days of FDR and the struggle against Germany and Japan? And what does it mean to be bankrupt if the US could be really, really bankrupt in the 1940s and then bounce back to fiscal health almost immediately as soon as the troops came home?

And if the US government is bankrupt today, how come it can raise money at approximately a zero real interest rate?

And on a philosophical level, how does Ryan measure the financial health of government when its purpose is not to make itself rich but to support the prosperity of everyone else?
My translation of the way Ryan uses the word “bankrupt” would be “I want to scare everyone about the current fiscal deficit, and the best way to do it is to use a business-sounding term that has no meaning at all in this situation and hope that the public, and especially the journalists, are too dumb to notice.”

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The “JOBS” bill today

Simon Johnson points us to more information on the JOBS bill (see link) and a Senate vote today:

As it currently stands, the “JOBS” bill now before the Senate would gut investor protection in the United States. The title of the bill is a complete misnomer – anything that weakens investor protection makes it more risky to invest in companies and increases the cost of capital to honest entrepreneurs. (For more background on the bill and links, see this piece.) 


Specifically, Senator Reed’s amendment would close or limit a major loophole that will allow large companies to avoid registering with the SEC (and therefore escape much regulation). The Reed Amendment would clarify how to define “shareholders” for the purpose of determining if a business is so widely owned that it must register with the SEC. Under the Amendment, the count should be based on beneficial owners of the shares, i.e., real people. The goal is to prevent evasion of the SEC registration threshold through “nominal” owners holding the shares for large numbers of beneficial owners. Big companies like H.R. 3606 – they will be regulated less and if the cost of capital rises for start-ups, that actually helps them. The Chamber of Commerce, the American Bankers’ Association, and the Independent Community Bankers of America have all weighed in heavily against the Reed Amendment – the idea of escaping SEC scrutiny greatly appeals to them.

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Is Congress drinking Grover Norquist koolaid? (or will it fund IRS appropriately

by Linda Beale

Is Congress drinking Grover Norquist koolaid? (or will it fund IRS appropriately)

IRS Commissioner Doug Shulman testified before the House Appropriations Financial Services and General Government Subcommittee on President Obama’s proposed 2013 budget for the IRS. Shulman wants Congress to provide adequate funding to the IRS to support its enforcement function. The IRS has 5000 fewer employees this filing season than in 2011, and Shulman is worried about the impact of that decline in enforcement capability on compliance and collections. See Rubin, IRS Eliminated 5,000 Jobs in past year amid budget cuts, Bloomberg (Mar.21, 2012).

Now, those “starve-the-beast” types that drink the Grover Norquist koolaid are generally just eager to kill all government, and particularly government programs that help ordinary people, are concerned with the general public good, or help ensure the vitality of important government programs.

  • So it seems that the right has no trouble talking about a need to return the US’s dismal health care system back to what it was before the little bit of progress accomplished in the Obama health reform legislation–they talk about eliminating government interference, but what they mean is letting health care profit centers, doctors, and insurers continue to rip off the American public that can least afford it with rentier profits.
  • And the right has no trouble with unfunding the EPA or enacting foolish laws restricting the agency’s ability to protect ordinary Americans’ health, livelihood, and simple quality of life through much needed environmental regulations that protect, air, water, land, and natural resources for the future. Two examples–the right’s push to “drill, baby, drill” with the claim that a trickle more of US oil will dent world prices (nope); and the right’s push for the Keystone Pipeline no matter what the cost in aquifers or natural environments, even though the benefits are likely to be miniscule (VERY few jobs; no real impact on world energy prices).
  • The right wants to privatize Medicare–that means that it would take a program that has proven it can deliver health care more affordably to all its participants than privately financed “competitive” health care, and make it into its poorly functioning cousin. One suspects that the goal here is to bury a government program that is working as intended, so that it will be even harder to move to the obvious solution for health care that the rest of the developed world recognized decades ago–Medicare for all, or a “single payer” system that has clout, provides portability and fairness.

And a component of the “starve-the-best; no-tax-increases-ever” koolaid package seems to be a desire to let the rich (the natural constituents of the right) get richer by continuing to be let off the hook on paying their fair share of taxes, while the overwhelming majority of Americans slip back into a much less hospitable context of just barely getting by. Taxes, of course, are one of the ways that is done, because it is so easy to hide the real purpose under a facade of caring about deficits (cut “entitlement” programs to save money) or growth (expand subdidies for the rich, to “grow” the economy).

So the IRS suffered from budget cuts that reduced its enforcement personnel. The result, of course, means fewer trained government officers to audit taxpayers and to investigate scandals like the wealthy millionaires and billionaires hiding their wealth overseas to avoid paying their fair share of taxes. And the danger is that criminal and civil tax evasion will be missed, because there are so few audits (only 1% audited annually) or that even compliant taxpayers will start to take their chances with the audit lottery once they realized that the IRS is part of the beast that the right is starving to death.

So Shulman is worried, he says, that budget cuts will erode voluntary compliance. He wants $12.8 billion for the IRS for the new fiscal year, an 8% increase. Rubin, IRS Eliminated 5,000 Jobs in past year amid budget cuts, Bloomberg (Mar.21, 2012).

He should get it. Every dollar spent on enforcement brings in multiples of revenues, so the cost-benefit analysis clearly favors adequately funding the IRS enforcement budget so that it can do its job. That helps in two ways–it produces revenues that reduce the deficit, and it reminds people that our voluntary compliance system is backed up by enforcement of the laws–they can’t just cheat and play the audit lottery with high hopes of getting by.

And cutting the IRS does “long-term damage”. Jose Serrano, Id.

So will Congress keep swallowing the Norquist Koolaid, or will it buckle down and make decisions that support the wellbeing of our nation and of our people? We will see.

crossposted with ataxingmatter

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Apple Whines About Having to Pay Taxes

Given Ryan’s release of his new plan calling for territorial taxation of corporations comes this example of Apple from Kenneth Thomas, Middle class political economist econoblog:

Apple Whines About Having to Pay Taxes
by Kenneth Thomas
On Monday, Apple announced that it was going to start paying dividends to shareholders, and buy back $10 billion worth of stock. What caught many people’s attention in the subsequent conference call, however, was the company’s pointed statement that it would not be bringing back any of the cash it holds overseas, estimated at $64 billion, or over 64% of its current cash on hand.
The reason, as stated by Chief Financial Officer Peter Oppenheimer, is that it would have to pay taxes on this money if it were repatriated to the United States. Apple made the money, so it owes taxes on it just like you or I would. But because the money was earned overseas (though realistically, some of it probably got there through transfer pricing), it can defer paying taxes on it until the money comes home. Taxes deferred are taxes reduced due to the time value of money, but that’s not enough for Apple. In good Mitt Romney fashion, Apple is working with other companies to try to get the tax laws changed in its favor.What they want, as Carl Franzen of TPM points out, is a “repatriation holiday” that will allow them to bring back the money at a greatly reduced tax rate, as in 2004. Franzen notes:

However, in that 2004 experiment, pharmaceutical companies were the largest beneficiaries and although $312 billion was brought back into the U.S. by some 800 companies, most of the money was spent on dividends and stock repurchases, as Bloomberg and the New York Times both reported, referring to numerous studies. In fact, some of the companies that benefited the most from the 2004 tax holiday ended up laying off employees.

Today, despite having just gone through the worst economic crisis since the Great Depression, U.S. multinationals now have over three times as much overseas as was brought back in 2004, some $1 trillion, according to Franzen’s article. Apple’s action Monday suggests that more dividends and stock repurchases would be the order of the day once again if they got their way.
According to Justin Fox, the $64 billion is “sitting in Apple’s overseas subsidiaries…” This almost certainly means it is in Ireland: According to Apple’s 2011 Annual Report (Exhibit 21.1), it has only two “significant” subsidiaries outside the country (and one significant subsidiary in the U.S.), both of which are in Ireland. Apple, then, is simultaneously benefiting from Ireland’s tax haven status and the deferral provisions of U.S. tax law.
What should be done? I agreed with Citizens for Tax Justice in January that not taxing worldwide corporate profits would give companies even more incentive to make their profits show up overseas than they do now. Fox notes a similar argument from tax attorney Edward D. Kleinbard, who says that ending the deferral provision is the right way to go. That way, companies’ income would be taxed in the year it was earned, and multinationals would get no benefit relative to domestic companies that don’t squirrel away their profits overseas. It would go a long way to ending our current situation where there is one tax law for the 1% and another one for the rest of us.

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