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Mandate No! MLR SI!: Heard here frist (sic)

No not the striking down of the mandate part, heck probably a thousand fingers were poised over an equal number of ‘Send’ keys when the ruling came down. Me? I took a shower and started thinking about the practical implications of ACA as it will operate under current law as modified today.

Starting with the MLR. Which you did hear about here first in this AB post from July 2009 HR3200 Sec 116: Golden Bullet or Smoking Gun . MLR stands for Medical Loss Ratio which in the final version of ACA was set at 85% for the Group market and 80% for the Individual market for health insurance policies issued by private insurers. Now ‘Medical Loss’ is itself an interesting term of art, it represents the actual amount of insurance premiums collected ‘lost’ via being expended on actual care paid for under your policy. That is for insurance companies the actual end service being delivered from purchase of their product is from their perspective a dead loss to be reduced. Hence a business model built around denying claims.

MLR minimums start to flip that model on its head. Under the rule if the ratio of premium collected to provider payments issued exceeds 15% or 20% respectively in Group or Individual market the difference has to be rebated to the policy holder. And indeed such rebate checks actually went out this year, this provision having already kicked in. Well after this morning’s ruling that rule will continue to operate until specifically repealed. And it is important, though maybe not as much as I was able to convince Donny Shaw of when he put this post up on Open Congress on Nov 14, 2009 The Most Important Health Care Reform Provision You’ve Never Heard Of. For example Richard Escow of HuffPo and elsewhere is of the opinion (expressed semi-privately to me and some others), that while important MLR can be gamed. And in fact I discuss that somewhat in my original 2009 post, feel free to rip on this in comments. Me? I still think MLR is transformational.

So what things are NOT included as ‘medical losses’? In short: administration, management, and direct profits from operations. (For example gains from retained and reinvested profits would not I think count against the company). Currently a lot of health insurance administration is focused on making sure that people likely to submit claims don’t get signed up and/or denying claims to those who for whatever reason obtain coverage. Well various separate ‘must cover’ ‘no pre-existing condition exclusion’ rules take care of much of the first part, under ACA the companies have little room to just turn customers away. And MLR installs limits on the second part. While companies have an incentive to trim their medical ‘losses’ as close to the minimum as possible, every dollar spent doing so puts a squeeze on the same 15% or 20% of premiums they need to pay management salaries and return profits to shareholders. While every dollar squeezed out of the claims process by increasing efficiency and throughput of claims (i.e. actually paying providers on a timely basis with a minimum of paperwork requirements) leaves that much left over for management and shareholders. Gosh all of a sudden we have a business model based on efficient DELIVERY of services rather than DENIAL of them.

Paging Rusty Rustbelt! And Mike Halasy! Because I would love to see how this argument plays to people from the provider community. Particularly folk who have been on both sides of the overall issue. And of course I welcome comment from everyone else. I have been largely absent from the Health Care Debate since actually passage of ACA, the ball went into the lawyers’ court and I am if anything less a lawyer than I am an economist. But after this morning we are right back in the policy analysis game. To which I say “Put me in coach!”

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From SCOTUSblog: The individual mandate survives as a tax. OH. MY. GOD!!!! — REPEATEDLY UPDATED (seven updates so far)

UPDATE: From SCOTUSblog: “The bottom line: the entire ACA is upheld, with the exception that the federal government’s power to terminate states’ Medicaid funds is narrowly read.”


SECOND UPDATE: The opinion is 5-4, with Roberts voting with the Dem appointees and writing the opinion, and Kennedy writing the main dissent.

Here’s more from SCOTUSblog:

The money quote from the section on the mandate: Our precedent demonstrates that Congress had the power to impose the exaction in Section 5000A under the taxing power, and that Section 5000A need not be read to do more than impose a tax. This is sufficient to sustain it.


The court reinforces that individuals can simply refuse to pay the tax and not comply with the mandate.


“Nothing in our opinion precludes Congress from offering funds under the ACA to expand the availability of health care, and requiring that states accepting such funds comply with the conditions on their use. What Congress is not free to do is to penalize States that choose not to participate in that new program by taking away their existing Medicaid funding.” (p. 55)

And (added after second update was posted):

Another way to think about Medicaid: the Constitution requires that states have a choice about whether to participate in the expansion of eligibility; if they decide not to, they can continue to receive funds for the rest of the program.

The most talked-about part surely will be “individuals can simply refuse to pay the tax and not comply with the mandate” part.  Is it really a mandate at all if there’s no penalty for refusal to comply?  So maybe it’s not a total victory, after all.  But it’s still a big, big victory.  

(The Medicaid part of the ruling has no effect on the breadth or implementation of the law at all.)


Correction from SCOTUSblog (and HT to buffpilot in the comment to my post):

Apologies – you can’t refuse to pay the tax; typo. The only effect of not complying with the mandate is that you pay the tax.  

Looks like everything revolves on it being a tax.  

Ah-hah!! It IS a TOTAL, TOTAL victory.  !!!


Again from SCOTUSblog:

In Plain English: The Affordable Care Act, including its individual mandate that virtually all Americans buy health insurance, is constitutional. There were not five votes to uphold it on the ground that Congress could use its power to regulate commerce between the states to require everyone to buy health insurance. However, five Justices agreed that the penalty that someone must pay if he refuses to buy insurance is a kind of tax that Congress can impose using its taxing power. That is all that matters. Because the mandate survives, the Court did not need to decide what other parts of the statute were constitutional, except for a provision that required states to comply with new eligibility requirements for Medicaid or risk losing their funding. On that question, the Court held that the provision is constitutional as long as states would only lose new funds if they didn’t comply with the new requirements, rather than all of their funding.  

Yup. Total, total victory.  


From SCOTUSblog:

The Court holds that the mandate violates the Commerce Clause, but that doesn’t matter b/c there are five votes for the mandate to be constitutional under the taxing power.

Well, kudos, to … um … me.  I called it pretty nearly spot-on.  I began to sort of wonder in the last few days whether in fact I really was onto something, because my post from June 15 laying that out (again) kept getting more and more “hits” as the days went by.  Usually my posts stop getting “hits” a few days after I post them.  I actually began (almost) thinking it was possible that a few people from within the Court itself—i.e., law clerks to the justices—were clicking the post after possibly being told of it by someone who reads, maybe, Business Insider.  If so, that would seem to indicate that I actually had called it right.  But I dared not really think that Supreme Court law clerks were reading my post.

Btw, in a comment to a blog conversation on Slate on Monday, I wrote:

Hmm.  Well, having gone out on a limb 10 days ago on a blog I write for, posting an article that discusses as one of the more likely possible healthcare-case results the tax-law outcome that Savage suggests in his LA Times article today, I’m feeling ever-so-slightly less lonely out on that tree branch.  At least now I’ll have someone to cling to on Thursday as the limb falls to the ground. 

The blog conversation is ongoing there.  The current latest entry (from last night) is here, should any AB readers be interested. 

Salvaging the idea that Congress did have the power to try to expand health care to virtually all Americans, the Supreme Court on Monday upheld the constitutionality of the crucial – and most controversial — feature of the Affordable Care Act.   By a vote of 5-4, however, the Court did not sustain it as a command for Americans to buy insurance, but as a tax if they don’t.  That is the way Chief Justice John G. Roberts, Jr., was willing to vote for it, and his view prevailed.  The other Justices split 4-4, with four wanting to uphold it as a mandate, and four opposed to it in any form.

Since President Obama signed the new law, it has been understood by almost everyone that the expansion of health care coverage to tens of millions of Americans without it could work — economically — only if the health insurance companies were guaranteed a large pool of customers.   The mandate to buy health insurance by 2014 was the method Congress chose to supply that pool.   It is not immediately clear whether the Court’s approach will produce as large a pool of new customers.   The ACA’s key provision now amounts to an invitation to buy insurance, rather than an order to do so, with a not-very-big tax penalty for going without.

Those are the first two paragraphs of Lyle’s (I love him, and can refer to him by his first name if I want to) three-paragraph initial article on the regular blog (as opposed to the live blog).  He’s sure to post updates to the article later today.

Earlier, on the live blog, Amy Howe wrote:

Take a quick look at Footnote 11, which is on page 44 of the slip opinion: Those subject to the individual mandate may lawfully forgo health insurance and pay higher taxes, or buy health insurance and pay lower taxes. The only thing that they may not lawfully do is not buy health insurance and not pay the resulting tax.

And for those of you who remember my writing about an obscure court-jurisdiction statute called the Anti-Injunction Act, which was a subject of controversy in the case, Lyle, writing earlier on the live blog, wrote:

Interesting, at least to scholars, that while the mandate and its attached penalty are a tax for purposes of its constitutionality, but not for the Anti-Injunction Act. If it were a tax for AIA purposes, this case would not have been decided re the mandate.

Also on the live blog, Lyle wrote:

The rejection of the Commerce Clause and Nec. and Proper Clause should be understood as a major blow to Congress’s authority to pass social welfare laws. Using the tax code — especially in the current political environment — to promote social welfare is going to be a very chancy proposition.

Tom Goldstein then wrote:

I dissent from Lyle’s view that the Commerce Clause ruling is a major blow to social welfare legislation. I think that piece of the decision will be read pretty narrowly.

I’m almost always in agreement with Lyle’s analyses (as is, I’m sure, Tom Goldstein, who is the blog’s publisher and also a major Supreme Court litigator; Amy Howe, also a lawyer, is Goldstein’s wife).  But, like Goldstein, I disagree with Lyle on this one.  In order for the Court to interpret this opinion as limiting Congress’s authority to enact social welfare legislation, the Court would have to place in question a slew of current, longstanding social welfare programs.  I don’t think that was Roberts’ intent—really, I don’t—and I don’t think the opinion will be viewed that way.  Unless, of course, Romney wins and appoints a wingnut to replace, say, Ginsburg if her health does not hold out.  


This one’s not from SCOTUSblog.  It’s from Ginsburg’s concurrence, joined by Breyer, Sotomayor and Kagan:

At bottom, THE  CHIEF  JUSTICE’s and the joint dissenters’ “view that an individual cannot be subject to Commerce Clause regulation absent voluntary, affirmative acts that enter him or her into, or affect, the interstate market expresses a concern for individual liberty that [is] more redolent of Due Process Clause arguments.”  SevenSky, 661 F. 3d, at 19.  See also  Troxel v.  Granville, 530 U. S. 57, 65 (2000) (plurality opinion) (“The [Due Process] Clause also includes a substantive component that provides heightened protection against government interference with certain fundamental rights and liberty interests.” (internal quotation marks omitted)).  Plaintiffs have abandoned any argument pinned to substantive due process, however, see 648 F. 3d 1235, 1291, n. 93 (CA11 2011), and now concede that the provisions here at issue do not offend the Due Process Clause.8

Footnote 8 says:

8. Some adherents to the joint dissent have questioned the existence of substantive due process rights.  See McDonald v.  Chicago, 561 U. S. ___, ___ (2010) (THOMAS, J., concurring) (slip op., at 7) (The notion that the Due Process Clause “could define the substance of th[e] righ[t to liberty] strains credulity.”); Albright v. Oliver, 510 U. S. 266, 275 (1994) (SCALIA, J., concurring) (“I reject the proposition that the Due Process Clause guarantees certain (unspecified) liberties[.]”).  Given these Justices’ reluctance to interpret the Due Process Clause as guaranteeing liberty interests, their willingness to plant such protections in the Commerce Clause is striking.

The SevenSky opinion, SevenSky v. Holder, that Ginsburg quotes from was written last November by Lawrence Silberman, a Reagan appointee to the federal Court of Appeals for the District of Columbia, and one of the most respected (in conservative legal circles) federal appellate judges, in one of the ACA cases. As for Ginsburg’s footnote 8, she says something I’ve wondered about all along: Substantive due process is legal doctrine under which Roe v. Wadeand, before that, the opinion striking down  a Connecticut law that prohibited the sale and use of contraceptives, were based.  Lawrence v. Texas, the 2003 Kennedy opinion invalidating Texas’s sodomy statute also was based on that doctrine.  Thomas and Scalia routinely lambaste the doctrine, as do many other tea partier folks. 

So the question is: Do these people now concede the appropriateness of the legal doctrine underlying those cases they hate so much?

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Markets are "natural" …financial intermediation

Lifted from the comments from an Ezra Klein article in the Washington Post comes an interesting idea that is not only currently debated, but also ties into ‘markets are “natural” idea’…

Paul Andrews comments:
Yes – lots of saving and borrowing, often in goods rather than money. When money is included its often only a fiat monetary base exchanged by the government for goods, with no banking sector and therefore no deposits created by lending, no M1, M2, M3. No shadow banking sector etc.

Refer to this BIS summary on fiscal dominance from December 2011

A quote: “Starting with financial intermediation, recall that banks play no role whatsoever in macroeconomic models of the pre-crisis era. These traditional models are based on the distinction between nominal and real quantities, and there are interest rates. But the only friction is the one associated with nominal price changes, so inflation and inflation control become the focus. (If it is costly to change prices, inflation creates a deadweight loss.) And, since the model is devoid of banks, there is no private debt. As I suggested at the beginning, the macroeconomic models of the future, with their added focus on financial linkages, need to have a rationale for debt as distinct from equity.

We need to understand why the predominant financial contract is a loan or a bond rather than equity. In fact, we need a clear understanding of the optimal debt/equity ratio for the economy as a whole. We know that high levels of debt can lead to disaster for a society, but beyond notions from crude empirical work, we don’t have any idea what the right level of debt is. A rich enough macro/monetary/financial model will tell us the answer.”

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Supreme Court decisions at 10:00 this morning….Scotusblog

Amy Howe, Anticipating the health-care decision: In Plain EnglishSCOTUSblog”:

…there are four questions before it. Three of those questions revolve around the “minimum coverage” provision, popularly known as the “individual mandate.” 

…But before the Court can decide whether the mandate is constitutional, it must first decide whether it can even rule on this question at all. 

…all that anyone will really be interested in with regard to the AIA is the Court’s bottom line: can it review the mandate issue or not? If it agrees with both sides that it can, all eyes will then turn to that constitutional question. Most Americans care about the bottom line: is the mandate constitutional? Even if the Justices disagree on the reasoning, the mandate would still survive.

Finally, as long as the Court doesn’t conclude that the entire ACA must fall, it will have to resolve one more issue: does another provision of the Act violate the Constitution because it effectively coerces the states, requiring them to comply with the ACA’s expanded Medicaid eligibility requirements or risk losing all of the money that they receive for Medicaid from the federal government?

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The assumption that markets are ‘natural’

by Brenda Rosser
re-posted from Econospeak with permission from the author

The assumption that markets are ‘natural’

I’ve just begun to browse the pages of David Graeber’s  2011 book entitled ‘Debt – The First 5,000 Years’.  Graeber is an anthropologist who makes no bones about the historical errors made by many economists on the evolution of markets and the use and nature of money.
On pages 44-45 Graeber writes:
“People continue to argue about whether an unfettered free market really will produced the results that [Adam] Smith said it would; but no one questions whether “the market” naturally exists….we simply assume that when valuable objects do change hands, it will normally be because two individuals have both decided they would gain a material advantage by swapping them.  One interesting corollary is that, as a result, economists have come to see the very question of the presence or absence of money as not especially important, since money is just a commodity, chosen to facilitate exchange, and which we use to measure the value of other commodities.  Otherwise it has no special qualities.
“….Call this the final apotheosis of economics as common sense.  Money is unimportant.  Economies – “real economies” – are really vast barter systems.  The problem is that history shows that without money, such vast barter systems do not occur….It’s money that had made it possible for us to imagine ourselves in the way economists encourage us to do:  as a collection of individuals and nations whose main business is swapping things.  It’s also clear that the mere existence of money, in itself, is not enough to allow us to see the world this way. …
“The missing element is in fact…the role of government policy…”

Graeber goes on to explain how government foster ‘the market’.  Laws, police, monetary policy, pegging the value of currency to precious metals, altering the amount of coins in circulation, regulating banks etc.
On page 49 Graeber asks a key question: “…what exactly was the point of extracting the gold, stamping one’s picture on it, causing it to circulate among one’s subjects – and then demanding that those same subjects give it back again?”
“This does seem a bit of a puzzle.  But if money and markets do not emerge spontaneously, it actually makes perfect sense.  Because this is the simplest and most efficient way to bring markets into being.”
Money brings markets into being.  Not the other way around, as most economists would have it.  If this is true then Graeber’s concluding thought has some authenticity:  “Perhaps the world really does owe you a living.”

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Lost Output Over $3 Trillion And Rising

by Kenneth Thomas

Lost Output Over $3 Trillion And Rising

Still traveling, so just a quick post, but this really can’t be emphasized enough. Andrew Fieldhouse at the Economic Policy Institute reports that the Congressional Budget Office now has cumulatively reduced its estimate of 2017 gross domestic product by 6.6% since the beginning of the recession in December 2007. As Fieldhouse points out, that doesn’t sound like much, but when it’s 6.6% of a $15 trillion economy, we are looking at about $1 trillion (with a “T”) of lost income in 2017. To put it another way, that is well over $3000 of income per person that year. That is on top of $3 trillion in potential GDP already lost since the recession began, according to Fieldhouse.

The culprit, of course, is the lack of further stimulus to the economy. After the totally inadequate $800 billion stimulus package in 2009, we have had essentially nothing. At the end of 2011, Republicans had to be shamed into approving a payroll tax cut they previously favored. Indeed, as Thomas Mann of the Brookings Institute and the Norman Ornstein of the American Enterprise Institute have pointed out, it is not the case that both parties are getting more partisan. As they put it, “Let’s just say it. The Republicans are the problem.” It is the Republicans in Congress who are blocking further stimulus measures. Electing a new Congress that will not pass a stimulus bill will cost Americans thousands of dollars out of their pockets.

We are a long way away from George Wallace Will Roger’s famous claim that there was not “a dimes’ worth of difference” between the two parties.

crossposted with Middle Class Political Economist

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Extreme Poverty Sets a New Record (Again)

Thought this one might be interesting.

(posted by Robert Waldmann / commentary after the jump)

extreme poverty update update:

I assume you have clicked the link. I’m not going to snip and paste the graph. Go there if you want to find out what I am talking about.

The rate of extreme poverty (income less than half the poverty line also called “deep poverty” and “severe poverty”) set a new record in 2010 for the second year in a row (the record only goes back to 1975.  I don’t know why).

I have three thoughts. The first (as in my old post) is that there is clear evidence that AFDC (pre-reformed welfare) had an important effect on deep poverty. Since the Welfare reform bill of 1996, the rate of deep poverty and not so deep but still pretty damn bad poverty (50 to 75% of the poverty line) have diverged. Both declined in the late 90s boom (which convinced people with short attention spans and no understanding of omitted variable bias that welfare reform was a great success). Since 2000 the increase in deep poverty dwarfs the increase in not so deep but still pretty damn bad poverty.

Also note the late 70s. This was a period of rapidly declining unemployment and high inflation. AFDC benefits were not indexed to inflation — instead the dollar amount was adjusted by state legislatures or, quite often, wasn’t. I think the divergence of the two rates which Soltas shows in the 1970s corresponds to real benefit levels in many states falling below half the poverty line. I note before a commenter does that the change in the 70s is overstated as food stamp benefits, which are not counted in income for calculation of poverty rates, automatically increase as cash benefits decrease. I note that the change due to the welfare reform bill of 1996 is, if anything, understated as the bill also included huge cuts to food stamps which accounted for much more of the forecast spending reduction than the change from AFDC to TANF.

Finally get this “Evan Soltas is a student at Princeton University, where he intends to major in economics. ” The guy hasn’t even officially chosen his major (he looks about 16 in the photo) !

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Yves Smith, Matt Taibbi, and Bill Moyers talk on the financial "Follies of Big Banks and Government"

Yves Smith, Matt Taibbi, and Bill Moyers talk on the financial Follies of Big Banks and Government

Matt Taibbi:
The question I wanted to ask is, was, really more about the criminality. I mean, none of the members in either the House or the Senate really got into the issue of all the different offenses that these banks have committed in the last few years. You know, or, an ordinary person, if he commits welfare fraud, never gets a food stamp again in his life.

So given that these banks have systematically and repeatedly committed fraud, repeatedly been caught, you know, in situations like Jefferson County, municipal bid rigging, why should we still give them billions and billions of dollars in emergency lending from the Fed, bailouts, all of this aid from the government? How come there’s no consequences for them and there are consequences for ordinary people?

Yves Smith: I would have asked questions more having to do with what’s the justification for complex banking at all? That why do we need, why shouldn’t banks be run on the utility basis? Why should we have people like Dimon and his, the members of the CIO unit, most of which he’s fired, what the justification for literally that hundreds of millions of bonuses were paid collectively to those people.

And now he says they didn’t know what they were doing. There’s no justification for this, the sort of level of compensation that we generally have on Wall Street. And I would like to see that myth starting to be punctured in more public places.

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No Healthcare Ruling—But Three Other Very Important Rulings—Today

The Court will announce its healthcare ruling on Thursday.  Tom Goldstein, founder of Scotusblog, said after this morning’s opinions were issued that, in light of the Court’s informal division-of-labor routine, and based on which justice wrote which of today’s majority opinions, it looks pretty clear that (as everyone has been predicting all along) Roberts will write the majority opinion in the healthcare case, possibly (Goldstein said) with assistance from Kennedy.  In other words, it’s likely that Roberts will write the part of the majority opinion that addresses the individual mandate and related penalty and that Kennedy may write the majority opinion on at least one of the other three issues in the case. 

Interestingly, at least to me, veteran LA Times Supreme Court correspondent David Savage has an article today in which he offers the possibility that—er—I’m right.  Here’s the relevant excerpt from Savage’s article:

The healthcare case has been fiercely debated as a test of whether Congress can require individuals to buy health insurance under its power to regulate commerce. Opponents have likened it to forcing Americans to buy healthy food, such as vegetables.

Lurking in the background is a way to decide the case on tax law grounds. No one can be prosecuted, punished or fined for violating the mandate. In fact, the word “mandate” does not appear in the law. In “practical operation,” the administration argued, it’s just a tax law.

If the mandate is really just a tax, that would be supported by the Constitution, which says Congress “shall have the power to lay and collect taxes … to provide for the common defense and general welfare.”

So, in the end, the justices could agree the law’s required tax payments are constitutional, while also making clear the government does not have broad power to mandate purchases.

Late last year, Judge Brett Kavanaugh of the U.S. Court of Appeals in Washington, an influential appointee of President George W. Bush and a friend of the chief justice, wrote an opinion arguing for treating the mandate as a tax law, not a regulation of commerce.

During oral arguments in March, the conservative justices sounded highly skeptical of giving the government the power to mandate purchases. But at one point, liberal Justice Sonia Sotomayorasked whether it would be constitutional for Congress to assess a tax for health insurance and include an exemption for everyone who had insurance.

“The government might be able to do that,” said Paul D. Clement, the lawyer for the Republican states suing to overturn the healthcare law. If so, the liberals asked, why can’t Congress require people to have private insurance or pay a tax penalty?

Having the law upheld on tax grounds would be a big win for the president.

(In my June 15 post, I paraphrased Sotomayor’s question and erroneously attributed it to either Roberts or Kennedy.  I said I couldn’t remember which of the two had asked the question, which is no surprise since neither of them did.  Ah; I should have known.)

Now on to today’s big rulings.  The most significant—and it is huge—is a big surprise.  In a 5-3 opinion (Kagan did not participate) written by Kennedy and joined by Roberts in Arizona v. United States, the Court struck down on “federal preemption” grounds almost all of the major provisions in Arizona’s stop/demand-citizenship-papers/detain-upon-suspicion-of-being-an-illegal-alien all Hispanic-looking-or-sounding-folks law.  “Federal preemption” is a legal doctrine, based on the Constitution’s Supremacy Clause, that bars states from enacting laws that conflict with a federal statute or that intrude into a policy area in which the Constitution grants the federal government sole control (e.g., national defense and foreign policy) or in which a federal statute indicates Congress’s intent to make federal statute the sole arbiter in that area of policy. 

On the only remaining major provision—which appears to allow the detention by state prison officials of anyone arrested on other grounds, in order to allow the officials to verify the person’s citizenship—the Court rule that it is too early to know whether or not federal law preempts that provision, because the state courts have not yet “interpreted” it.  The opinion makes clear, though, that if the state court interprets the provision to permit a detention or an extension of a detention in order to enable the citizenship check, this provision, too, likely would be preempted.  And the opinion says explicitly that even if the state court interprets the provision narrowly enough to survive preemption on the grounds argued in this case, the provision may be preempted on other grounds or it may violate another provision of the Constitution.  In a separate lawsuit, the law is being challenged on Fourteenth Amendment equal protection (racial profiling) and due process grounds.

UPDATE: Here’s an outstanding discussion of the Arizona-statute opinion at Scotusblog.

The other major ruling today in a fully briefed and argued case—two cases, actually; one from Alabama, the other from Arkansas—extended the Eight Amendment’s bar to cruel and unusual punishment to strike down as unconstitutional state statutes that mandate life imprisonment without possibility of parole when the statute is applied to minors.  This was a 5-4 opinion written by Kagan and joined by Kennedy.

In the final ruling of broad significance, the Fab Five summarily reversed (i.e., without full briefing and oral argument) the Montana Supreme Court in the case in which that court had upheld the constitutionality of a longstanding Montana campaign-finance statute despite Citizens United.  I had called this one wrong in postings on AB, saying that I thought the Court would agree to hear the case, but a week ago I realized that I probably was wrong.  The Court had initially scheduled its decision for last Monday on whether or not it would hear the case next term.  When it put off its announcement until today, I knew what that meant.

The dissent, written by Breyer and joined by the other Dem appointees, says that while they had the minimum number of votes (four) to force full briefing and oral argument, the four decided not to do so because they recognized that there was no chance that any of the other five would vote differently if the case were argued.  I think the four should have forced full argument next term, not because there was a chance that one of the five would switch sides—there was not—but because this case would have educated the public about a critical fact that most of the public probably does not know: that in Citizens United, the 5-4 majority didn’t hold that the First Amendment speech grounds are absolute—a ruling that would have required them to expressly overrule the Court’s longstanding election-law precedents—but instead based its ruling on a “finding” of utterly fabricated and baseless fact.  The 5-4 majority simply declared, based on nothing at all, that they “find” that unlimited campaign “expenditures” by outside individuals, groups and corporations does not “give rise” to corruption or to the appearance of corruption.

Had the Court been forced to have a full hearing on the Montana case, complete with oral argument, the public would have learned that in election-law cases, this 5-4 majority simply fabricates facts and casually varies the standard under which the Court can strike down a statute as unconstitutional, depending on what is required for the majority rule in a way that (significantly) helps Republican candidates.  In CitizensUnited, for example, the majority not only decided on its own to raise the issue of the constitutionality of the campaign-expenditure limitations in the McCain-Feingold law, a tactic that violates the Court’s own procedural norms and, in that instance, its own Article III “jurisdictional” precedents;* they also required that Congress have vast, specific evidence that unlimited expenditures cause corruption or the appearance of corruption, and then denied the government the opportunity to gather and present that evidence, instead simply coopting for themselves the writing of the “facts.”  Yet, in a case a few years ago that challenged the constitutionality of a state law that required a government-issued photo ID in order to prevent voter fraud, the 5-4 majority required no evidence whatsoever by the state that widespread voter fraud existed—and ignored the evidence that such voter fraud is almost nonexistent. 

In my opinion, it is this aggressive but quiet altering of procedural and standard-of-review law in cases that could affect election outcomes, in a manner that baldly favors Republican candidates either directly or indirectly, that makes this 5-4 majority so dangerous.  But for the moment, I’ll rejoice in the outcome of the two opinions in argued cases that I discussed above.
And on Thursday, we’ll learn whether Savage and I are right or whether instead almost everyone else is.

*The part of that sentence that reads “a tactic that violates the Court’s own procedural norms and, in that instance, its own Article III “jurisdictional” precedents” was added for clarity on 6/26.

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Foreclosure, mortgage and promissory notes in MA

Via Firedoglake’s David Dayen comes this post of the ‘ambiguity’ of a State Supreme Court ruling on one case of foreclosure action and the requirements to ‘own’ a property.

Based on my conversations, the ruling does not allow Fannie Mae to foreclose. It remands the case back to the lower court for them to decide how to proceed. And while the case is prospective, meaning that it only applies to foreclosure actions from this point forward, as Adam Levitin explains there are still some added protections for homeowners granted. In the case, Eaton v. Fannie Mae and Green Tree Servicing, the homeowner argued that a lender cannot foreclose unless they hold both the mortgage and the promissory note. And the high court in Massachusetts agreed with that.

Georgetown University Law Professor Adam Levitin, who wrote a friend-of-the-court brief supporting Eaton’s position, said the decision makes clear that lenders who do not hold both the mortgage and the promissory note do not have the right to foreclose, an area of state law that until now has been ambiguous.

“It’s not an outright victory. The court was definitely concerned that if it applied the ruling retroactively, that it would cloud title for a lot of real estate in Massachusetts. They avoided that,” Levitin said.
“However, for people who are currently in foreclosure or worried that foreclosure will happen in the future, this rule matters quite a bit because the mortgage industry was, frankly, sloppy about its paperwork.
“If you lost your house in foreclosure, you’re not getting it back because of this, but overall, it means homeowners have pretty good protections, namely, you can’t be thrown out of your house unless the lender can absolutely prove they have the right to do so.”

Update: (hat tip rjs) under the fold on Abigail Field’s post on the decision.

Eaton v. Fannie Mae decision by the Massachusetts Supreme Judicial Court is not a huge banking industry win going forward. In fact, if the Legislature lets it stand, it’s a huge homeowner win. Forget the part about the decision applying in the future only; while I think it is wrong, it was doctrinally reasonable and arguably protects many innocent third parties.

Going forward, the really big deal is that the Court has taken the “show me the note” defense and made it “show me the note owner.”  

“Show me the note owner” is really hard to do in an era of mass securitization fail. Securitization fail means the trust doesn’t own the loans. And if the trust doesn’t own the loans, then the servicer isn’t the agent of the note owner and can’t foreclose non-judicially. Moreover, as this Court’s earlier Ibanez decision revealed, securitization fail may have occurred more often in Massachusetts than elsewhere.

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