Budget & Taxation
• Tennessee Pork Report 2014: Roasting Wasteful Government Spending – Beacon Center of Tennessee
• Constitutional Solutions to Our Escalating National Debt: Examining Balanced Budget Amendments – Mercatus Center
• Municipal Fiscal Emergency Laws: Background and Guide to State-Based Approaches – Mercatus Center
• The Conservative Texas Budget – Texas Public Policy Foundation
• How Obamacare’s “Cadillac Tax” Will Affect Local Governments, Public Employees and Local Taxpayers – Washington Policy Center
Crime, Justice & the Law
• Boehner v. Obama: Can the House of Representatives Force the President to Comply with the Law? – The Heritage Foundation
• A Reader’s Guide to Labor Share – American Action Forum
• Entrepreneurship and Human Flourishing – American Enterprise Institute
• Poverty in America—and What to Do About It – American Enterprise Institute
• Institutions and Economic, Political, and Civil Liberty in the Arab World: The Prospect for Economic Reform in the Wake of the Arab Spring – Fraser Institute
• For the Least of These: A Biblical Answer to Poverty – Institute for Faith, Work & Economics
• Lessons from Teach For America – National Center for Policy Analysis
• Giving Kids Credit: Using Scholarship Tax Credits to Increase Educational Opportunity in Massachusetts – Pioneer Institute for Public Policy Research
Elections, Transparency, & Accountability
• The Death of Deliberation: Partisanship and Polarization in the United States Senate – Rowman & Littlefield
Family, Culture & Community
• The 2014 Index of Culture and Opportunity – The Heritage Foundation
Foreign Policy/International Affairs
• The Shi’ites of the Middle East: An Iranian Fifth Column? – American Enterprise Institute
• To Secure Southern Border, US Must Lead International Effort to Stabilize Central America – American Enterprise Institute
• Making David into Goliath: How the World Turned Against Israel – Encounter Books
• Refuting Jihadism: Can Jihad Be Reclaimed? – Hudson Institute
• Fighting to the End: The Pakistan Army’s Way of War – Oxford University Press
• Putin’s New Old Russia – Reason Foundation
• Primer: Halbig v. Burwell – American Action Forum
• How Risky Is It to Be Uninsured? – American Enterprise Institute
• Who Pays for Public Employee Health Costs? – Cato Institute
• Has pCODR Improved Access to Oncology Drugs? – Fraser Institute
• Has the Affordable Care Act Slowed the Growth of Health Care Spending? – National Center for Policy Analysis
• Obamacare by the Numbers – Reason Foundation
• Aereo Decision a Boon, Not a Bane for Innovation – American Enterprise Institute
• Municipal Franchise Fees: Why Are Consumers Paying Millions Every Year? – Texas Public Policy Foundation
• Energy Exports Promote Prosperity and Bolster National Security – The Heritage Foundation
• IMF Wants U.S. Taxpayers to Shoulder More Risk – The Heritage Foundation
• U.N. Repeating Past Mistakes in New Sustainable Development Goals – The Heritage Foundation
• India and the Global Economy – Hudson Institute
• From Minimum Wages to Maximum Politics – Cato Institute
Monetary Policy/Financial Regulation
• Assessing the Impact of the Dodd-Frank Act Four Years Later – American Enterprise Institute
• Moving Beyond Fear: Addressing the Threat of the Islamic State in Iraq and Syria – American Enterprise Institute
• What Good Is Grand Strategy? – Cornell University Press
• After the Malaysian Airlines Atrocity: 10 Ways the U.S. Should Respond to Russia’s Role in Ukraine – The Heritage Foundation
Natural Resources, Energy, Environment, & Science
• Europe’s Greens Hit Stormy Weather – Capital Research Center
• Climate Change Regulation and Prediction Markets – Cato Institute
• Replacing the Environmental Protection Agency – Heartland Institute
• California’s Electricity Policy Future Beyond 2020 – Hoover Institution
Regulation & Deregulation
• Tesla and the Car Dealers’ Lobby – Cato Institute
• Do Coastal Building Codes Make Stronger Houses? – Cato Institute
• Which Way for the Highway Trust Fund? – The Heritage Foundation
• The Comparative Expense of the Proposed New Terminal Plan for Kansas City International Airport – Show-Me Institute
• Does SNAP Support Work? Yes and No – American Enterprise Institute
Whose job is it to fix ObamaCare? This week, two different U.S. district courts gave two different answers to that question. In Halbig v. Burwell, the D.C. Circuit Court declined to allow the Internal Revenue Service to deviate from the plain meaning of a section of the law that limits ObamaCare’s subsidies to exchanges established by the states. In King v. Burwell, the Fourth Circuit decided that the law viewed as a whole contained enough ambiguity that deference to the IRS’s expansion of the subsidy scheme was appropriate.
At issue in both cases was Section 36B of the Internal Revenue Code, created by the Affordable Care Act. That section creates refundable tax credits for the purchase of qualifying health insurance and specifies that the credits are available to those enrolled “through an Exchange established by the State […] .” The plain meaning of that provision is that tax credits are not available in the 36 states in which the federal government stepped in to create exchanges because the state choose not to do so.
More than just tax credits are at stake, though. ObamaCare also stipulates that the employer penalties apply when an employee receives subsidies through an exchange. No subsidies, no employer penalty. Further, without the subsidies, many would not be able to afford the insurance offered in the federal exchanges. Those folks would thus qualify for a hardship exemption from the individual mandate.
Thus, linking subsidies to state exchanges would seem to offer a way for each state to limit the reach of the law. The Internal Revenue Service, deciding that Congress could not have intended those results, offered the tax credits in all the ObamaCare exchanges. Four lawsuits ensued, and two of the cases were decided on Tuesday. The split between the Fourth Circuit and the D.C. Circuit means that the Supreme Court could take the case soon—unless the D.C. Circuit decides to rehear the case en banc and reverses the three judge panel.
The plaintiff’s theory of the case was developed largely by Michael Cannon of the Cato Institute and Jonathan Adler of the Case Western Reserve University School of Law. In a 2013 article in Health Matrix, Adler and Cannon laid out the case that Congress did indeed intend to restrict the subsidies to exchanges established by the states in order to induce the states to participate. [“Taxation without Representation: The Illegal IRS Rule to Expand Tax Credits Under the PPACA” Health Matrix, Spring 2013]
In striking down the IRS rule allowing tax credits in the federal exchanges, the D.C. Circuit emphasized it was bound by the plain meaning of the text unless the government could demonstrate that such a construction would lead to absurd results. The Court agreed with the plaintiffs that it was not absurd to see the restriction of subsidies to state-exchanges as a way of incentivizing state participation. The Fourth Circuit essentially put the burden of proof on the plaintiffs rather than the government, and ruled that the IRS’s interpretation was reasonable since it was consistent with the overall purpose of the law.
In reaching its decision, the D.C. Circuit quoted the words of Justice Thurgood Marshall from a 1985 Supreme Court case: “[T]he fact that Congress might have acted with greater clarity or foresight does not give courts a carte blanche to redraft statutes in an effort to achieve that which Congress is perceived to have failed to do.” The D.C. Circuit went on to conclude:
Within constitutional limits, Congress is supreme in matters of policy, and the consequence of that supremacy is that our duty when interpreting a statute is to ascertain the meaning of the words of the statute duly enacted through the formal legislative process. This limited role serves democratic interests by ensuring that policy is made by elected, politically accountable representatives, not by appointed, life-tenured judges.
Congress clearly failed to anticipate that the law’s disincentives for states to participate were much more powerful than the incentives. At least one court has said it is Congress’s job, not the court’s or the IRS’s, to fix the problem created by that failure of foresight.
Or to decide not to fix it, if it chooses. As Michael Cannon estimates, upholding the ruling for plaintiffs in Halbig “would free from potential illegal taxation more than ten times as many people as lose an illegal subsidy.” [Forbes, July 21] That sounds like a problem solved to us.
But what does the architect of ObamaCare think? Who could have thought the writers of ObamaCare really intended to limit the law’s subsidies to exchanges established by the states? That was the theory behind the plaintiffs case in Halbig v. Burwell; the plaintiffs won, and liberals have been busy accusing the D.C. Circuit Court of denying millions their subsidies because of a drafting error.
So who could believe that part of the bill wasn’t just a drafting error? How the about the MIT professor who helped write ObamaCare, Jonathan Gruber. Here’s what Gruber told an audience at the Noblis Innovation and Collaboration Center on January 18, 2012:
What’s important to remember politically about this is if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits—but your citizens still pay the taxes that support this bill. So you’re essentially saying [to] your citizens you’re going to pay all the taxes to help all the other states in the country. I hope that that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges. But, you know, once again the politics can get ugly around this. [For video of Gruber’s talk, see “Obamacare Architect Admitted in 2012 States Without Exchanges Lose Subsidies,” by Ryan Radia, Competitive Enterprise Institute, July 24. The quoted passage begins at 31:25 of the video.]
As Michael Cannon reports, “Gruber scarcely had time to plead temporary insanity” before another video of Gruber making similar comments emerged. Here’s what he told the Jewish Community Center of San Francisco eight days before his Noblis presentation:
A number of states have even turned down millions of dollars in federal government grants as a statement of some sort. They don’t support health care reform. I guess I’m enough of a believe in democracy to think that when the voters in states see that by not setting up an Exchange, the politicians in their state are costing state residents hundreds of millions and billions of dollars that they’ll eventually throw the guys out. But I don’t know that for sure. And that is really the ultimate threat, is: Will people understand that, gee, if your governor doesn’t set up an Exchange, you’re losing hundreds of millions of dollars of tax credits to be delivered to your citizens? So that’s the other threat, is: Will states do what they need to do to set it up? [For video see: “Oops! … Gruber Did It Again,” by Michael Cannon, Forbes, July 25]
Socialism was both an economic and a moral tragedy. A new study finds that socialism was hazardous to people’s moral health. Zenon Evans reports:
“The longer individuals were exposed to socialism, the more likely they were to cheat on our task,” according to a new study, “The (True) Legacy of Two Really Existing Economic Systems,” from Duke University and the University of Munich. The team of researchers concluded this after working with 259 participants from Berlin who grew up on opposite sides of the infamous wall.
When playing a dice game that could earn them €6 ($8), subjects originally from the East, which was for four decades under socialist rule, were more likely than their market economy counterparts in West to lie about how they fared.
The game required participants to roll a die after choosing the top or the bottom side and then recording the result. And then doing it again 39 more times. The participants were not required to say whether they had chosen the top or the bottom before writing down the result. The higher the tally, the bigger the payout. Systems of scarcity, the study authors theorized, “pressured or forced people to work around official laws.” [Reason, July 22]
It’s not hard to see how socialism might degrade people’s morals if you can imagine an economy in which everything is run like a Veterans’ Hospital.
And speaking of socialism and shaky morals … A crony capitalist’s attempt to get revenge via a defamation lawsuit against journalists who tell the truth has failed. Will Swaim of Watchdog.org reports:
A U.S. judge in Mississippi on Thursday threw out an $85-million lawsuit in which an electric car company founded by Virginia Gov. Terry McAuliffe alleged Watchdog.org had libeled the firm.
Judge Michael P. Mills said GreenTech Automotive failed to prove his Mississippi court had jurisdiction over Watchdog.org’s parent, Virginia-based Franklin Center, and Watchdog’s Virginia reporter, Kenric Ward.
The judge’s order noted that Watchdog’s “articles were not aimed at Mississippi” or even GreenTech itself. […]
“This lawsuit against our news organization was an act of intimidation from the beginning, and we simply refused to cave,” said Jason Stverak, president of Watchdog.org’s parent Franklin Center.
While campaigning for Virginia governor, McAuliffe claimed he founded GreenTech – evidence, he said, of his entrepreneurial skill and readiness to make Virginia a major player in the car business. But Watchdog investigations revealed that McAuliffe’s plan to build his plant in Virginia with government subsidies had been rebuffed by that state’s economic development officials, some of whom were concerned about GreenTech’s effort to raise cash through an unusual federal visa program. That process, called the EB-5 program, allows foreign nationals to obtain a U.S. visa in exchange for $500,000 investments in targeted U.S. businesses. GreenTech is one of those businesses.
On April 5, 2013, just days before GreenTech filed its libel suit against Watchdog, McAuliffe quietly disclosed that he had resigned four months before, on December 1, 2012. The retroactive resignation appeared to be an attempt to divorce McAuliffe from the company. [Watchdog.org, July 24]
How are we doing? Some good news:
Some bad news:
These are just two of 31 indicators of cultural health that are now being tracked by The Heritage Foundation’s new publication, 2014 Index of Culture and Opportunity: The Social and Economic Trends that Shape America. The Index also tracks trends on abortion, fertility, marriage, divorce, religious observance, school choice policies, unwed child birth, dependence on welfare, and much more. Numerous policy experts have contributed commentary to the Index to help put these data into context. If you want to understand how the culture affects families, communities, and economic opportunity you should read through the Index. Keep this resource handy for discussing the issues with your friends, colleagues, and neighbors—and for encouraging policymakers to focus on the culture.
John Blundell, R.I.P. John Blundell, a builder of the liberty movement on both sides of the Atlantic, died on Tuesday at the age of 61. Steve Davies’ tribute describes Blundell’s numerous contributions to British and American free-market think tanks. These include serving as Presidents of both the Institute for Humane Studies and the Atlas Economic Research Foundation, where “he presided over a period of dynamic growth and innovation,” especially “at IHS where there was an expansion of existing programmes and the introduction of new ones.”
As President of the Charles Koch and Claude R. Lambe Charitable Foundation, Blundell helped develop “a systematic programme of targeted and goal driven philanthropy, not least in the direction of support and development to high-quality young scholars.” Davies writes: “Over the years these grants have supported a whole generation of people who have gone on to successful and productive careers in academia, the media and public policy and this is undoubtedly one of his most important legacies.”
In 1993 Blundell became Director General of the Institute of Economic Affairs, in which role he “steadied the ship and reaffirmed the historic core purpose and mission of the IEA: that is to affect the climate of opinion in the long term by producing high quality research and publications that influenced the creators of public opinion (academics, journalists, and writers).” Davies continues:
He wrote a number of pieces on how to effectively wage a ‘war of ideas’, which were collected and published by the IEA under the title Waging the War of Ideas in 2003. In 2009 he stepped down as Director General and returned to the US where he continued to be active as a speaker and author, most notably in his Ladies For Liberty: Women Who Made a Difference in American History.
John had a particular combination of qualities that made him an effective and important figure in the history of the freedom movement on both sides of the Atlantic. An excellent public speaker and lecturer, he was also a clear writer, producing a full length life of Margaret Thatcher and the aforementioned book on libertarian women and their contribution to the cause of liberty. He was a highly effective networker and brought together many people who would otherwise never have known each other. He was also a very effective fundraiser but he combined this with a very clear vision of how to use funds and donations to obtain a long-term impact. In contrast to too many people who think of fundraising and other activism simply as a way to support a current short-term campaign, John was a great institution builder who was always looking to convert current donations into something long term that would have a lasting impact. This could involve institutions, programmes and also talented individuals: there are many people all over the world now who owe much to his support and his identification of them as a cause worth investing in. John’s success in the area of institution and programme building can be seen in the number of institutions that he helped to develop or played a part in founding, including the Charles Koch Charitable Foundation, the Buckeye Institute, the Atlas Economic Research Foundation, the Fraser Institute, the Institute of Economic Studies, the Institute for Justice, and (through the Institute Development and Relations Committee of Atlas) many think tanks in various parts of the world. [Institute of Economic Affairs, July 23]
Uber is pro-Uber, not pro-free market. In spite of opposition from the taxi cabs and the regulators who make the taxi cartels possible, Uber and Lyft have brought more competition in transportation services to a number of cities around the country. Policy-wise, however, the companies are not asking cities for deregulation; rather, they have been asking regulators to recognize a new regulatory category for ridesharing services. The accommodation that Uber and Lyft are pushing could itself become a barrier to innovations just around the corner. Marc Scribner thinks Uber and Lyft might end up as the enemies of automated cars, for example:
Once fully automated technology is sufficiently reliable, it would be possible for anyone to schedule and dispatch their own empty car to someone else—whether for family, friends, or for hire. What if you could park, hike down a trail, and have your car pick you up on the other side? This will also enable entrepreneurs to easily form their own start-up networks for those who do not own or want to use their own car. […]
How will the lobbyists of Uber and Lyft respond when you and I are able to dispatch our cars to family, friends, and fares, while not being subject to costly insurance requirements, criminal background checks, and zero-tolerance drug and alcohol policies? Maybe they won’t mind. Or maybe they’ll react the way taxi cartels did. [Skeptical Libertarian, July 23]
Video of the week: How did the world turn against Israel? Hamas puts its rocket launchers in schools, but Israel gets blamed for civilian deaths when it strikes back—or at least partially blamed. Max Fisher’s Voxsplaining last week is a representative example of this genre of blame-shifting: “This is the one thing that both Hamas and Israel seem to share: a willingness to adopt military tactics that will put Palestinian civilians at direct risk and that contribute, however unintentionally, to the deaths of Palestinian civilians.” [Vox, July 17]
How did we get to the point where Hamas’ barbarism has become an argument for Israel to not defend itself? Joshua Muravchik’s talk at The Heritage Foundation this week sheds some light on why many people are so quick to blame Israel when Hamas is clearly the aggressor.
Muravchik spoke about his book, Making David into Goliath: How the World Turned against Israel, which sought to explain why world opinion has shifted from being largely pro-Israel during the 1967 Arab-Israeli War to mostly anti-Israel today. The shift is partly explained by the death of Pan Arabism and rise of Palestinian nationalism. After the 1967 war, Israel was seen less as the underdog surrounded by hostile neighbors and more as the denier of another people’s national aspirations.
But that’s not the whole explanation, says Muravchik, who points to several other developments. In brief, these are: (1) The bombings, hijackings, and oil embargos during the 1970s put European governments into a mode of appeasing Arab and Muslim opinion, as Henry Kissinger observed when he tried to organize a Western response to dependency on Middle East oil. (2) There are many more Arabs and Muslims in the world than Jews; and there are many Arab and Muslim countries, but only Israel is a Jewish-majority country. That strength in numbers has allowed Arab and Muslim countries to turn the United Nations into an anti-Israel platform—at least at the sub-Security Council level. And (3) The cause of Palestinian nationalism has benefitted from a shift in the way progressives understand political struggle. Progressivism used to see the world through the lens of class struggle. Now the “West versus the rest,” anti-neocolonialism is the dominant paradigm, and the Palestinian cause fits neatly into that frame.
Muravchik has been thinking about these issues for a long time. His new book turned out to be pretty relevant just this week; unfortunately, it will probably be relevant in other weeks, too.
Where the Israel-Gaza conflict comes from: Israel’s critics would have you believe that Israel’s invasion of Gaza is a gross overreaction to a few rockets that are not doing much damage, anyway. But as Michael Mukasey explains, the conflict isn’t really about rockets at all; it’s about tunnels:
On July 5 Israeli planes damaged a tunnel dug by Hamas that ran for several kilometers from inside the Gaza Strip. The tunnel emerged near an Israeli kibbutz named Kerem Shalom—vineyard of peace.
That Israeli strike presented Hamas with a dilemma, because the tunnel was one of scores that the group had dug at great cost. Were the Israelis specifically aware of the tunnel or had their strike been a random guess? Several members of the Hamas military leadership came to inspect the damage the following day, July 6. A later official Israeli report said that the Hamas inspectors were killed in a “work accident.” But what if the Israelis had been waiting for the follow-up and struck again?
Hamas now saw its strategic plan unraveling. The tunnel network gave it the ability to launch a coordinated attack within Israel like the 2008 Islamist rampage in Mumbai that killed 164 people. Recall that in 2011 Israel released more than 1,000 Palestinian prisoners, more than 200 of whom were under a life sentence for planning and perpetrating terror attacks. They were exchanged for one Israeli soldier, Gilad Shalit, who had been taken hostage in a cross-border raid by Hamas. Imagine the leverage that Hamas could have achieved by sneaking fighters through the tunnels and taking hostages throughout Israel; the terrorists intercepted Saturday night were carrying tranquilizers and handcuffs.
If the Israeli strike on the tunnel near the Kerem Shalom kibbutz presaged a drive to destroy the entire network—the jewel of Hamas’s war-planning—the terrorist group must have been thrown into a panic. Because by this summer Hamas was already in desperate political straits. […]
It had lost the financial support of Egypt and could not get renewed support from Iran in the measure it needed. To some in the organization it appeared that Hamas had only one card to play—and on July 7 it played that card with rockets. [Wall Street Journal, July 20]
You, taxpayer, may end up paying the “Cadillac tax,” even if you don’t have expensive health insurance. The so-called “Cadillac tax,” a tax on high-cost health insurance, is supposed to discourage the kind of overly generous first-dollar coverage that encourages too much health care consumption. That tax was deferred until 2018, but Roger Stark reports that private employers are already offering fewer plans that would be subject to the tax:
The non-partisan Congressional Budget Office (CBO) originally estimated the Cadillac Tax would generate $137 billion in new revenue over 10 years. Last year the CBO re-calculated the revenue at $80 billion, because private employers were already shifting to less generous health insurance plans.
But one kind of employer is an exception to the trend: The government itself:
United Benefit Advisors (UBA) surveyed 11,000 employers last year. The report found that government-employer annual health care costs increased at double the rate of health coverage in the private sector. The survey also showed that private-sector employees have larger co-pays and higher out-of-pocket expenses than public workers. Since the recession of 2008, wage freezes have been common for all workers, but government employees have been much more likely to receive increased compensation through expanded health benefits, even as public-sector salaries are held flat.
Stark also reports that the large public employee unions are already bargaining for retaining generous health care benefits in their next contracts, which will run past 2018. [Washington Policy Center, July 2014]
In form, the public employee unions bargain with the government, but such negotiations are often an exercise in self-dealing: Politicians vote for generous government worker benefits, and the government workers in turn vote for the politicians. Expect the Cadillac tax to add to state and local tax burdens.
• Find out how the federal budget looks if you see it in a 30-year window. Hint: Not good. Sen. Ron Johnson (R-Wis.) will speak at the Cato Institute at noon on July 31.
• Smart girls, go meet other smart girls at the Smart Girl Summit 2014. The conference “will bring together over 200 activists, bloggers, and community leaders” to talk about fighting the liberal agenda. And also shoot guns. The conference will be held August 1 – 2 at the Doubletree by Hilton Atlanta-Buckhead.
• Discover how law enforcement agencies around the country are abusing asset forfeiture laws for their own profit. Rep. Tim Walberg, the Washington Post’s Radley Balko, and the Institute for Justice’s Scott Bullock will talk about how to rein in cops behaving like robbers at a Heritage Foundation talk. The even will begin at noon on July 29.
• Students, learn how to champion the principles of freedom at your school and beyond. The top teachers in the conservative movement will share their wisdom with you at the Young America’s Foundation’s National Student Conservative Conference. The week-long conference will begin July 28 on the campus of the George Washington University in Washington, D.C.
• Learn what’s wrong and what’s right with the economics profession. Peter Boettke will discuss his book Living Economics: Yesterday, Today, and Tomorrow at the next meeting of the National Economics Club. The talk will begin at noon on July 31 at the Chinatown Garden in Washington, D.C.
• See if you can figure out whether Jim Geraghty’s new book is fact or fiction. Geraghty will talk about his book, The Weed Agency: A Comic Tale of Federal Bureaucracy Without Limits, at the John Locke Foundation in Raleigh, N.C. Geraghty’s talk will begin at noon on July 28.
(Want more stuff to do? Check out InsiderOnline’s Conservative Calendar.)