The Heritage Insider: What's so compelling about mandated coverage? EPA wants even more administrative power, don't forget ObamaCare's fiscal problems, and more
Updated daily, InsiderOnline (insideronline.org) is a compilation of publication abstracts, how-to essays, events, news, and analysis from around the conservative movement. The current edition of The INSIDER quarterly magazine is also on the site.
July 12, 2014
Latest Studies: 38 new studies, including a Hoover Institution book on the tyranny of the majority throughout history, and an American Action Forum report on VA paperwork
Notes on the Week: What’s so compelling about mandated coverage? EPA wants even more administrative power, ObamaCare still have major fiscal problems, and more
To Do: Find out how Dodd-Frank is going
Budget & Taxation
• Unabashed Radicals – Capital Research Center
• North Carolina’s E-Cigarette Tax: Where Bad Tax Policy Meets Special Interest Politics – John Locke Foundation
• Proposal 1 of 2014: Summary and Assessment – Mackinac Center for Public Policy
• A Tale of Three Taxpayers – Mercatus Center
• State Economic Prosperity and Taxation – Mercatus Center
• Adding Bonus Expensing to the Camp Tax Reform Plan – Tax Foundation
Economic and Political Thought
• Barry M. Goldwater: The Most Consequential Loser in American Politics – The Heritage Foundation
• Democracy’s Dangers and Discontents: The Tyranny of the Majority from the Greeks to Obama – Hoover Institution
Economic Growth
• Policy Lessons from Illinois’ Exodus of People and Money – Illinois Policy Institute
• Missing Workers and Missing Growth – Independent Women’s Forum
• The Relationship between Political Connections and the Financial Performance of Industries and Firms – Mercatus Center
Education
• A Bad Day for Bad Teachers – Capital Research Center
• Early Retirement Payoff – Education Next
• The Chartered Course: Can Private School Choice Proponents Learn from the Charter School Sector? – Friedman Foundation for Educational Choice
• Meeting the Commonwealth’s Demand: Lifting the Cap on Charter Public Schools in Massachusetts – Pioneer Institute for Public Policy Research
• Texas Education: Original Intent of the Texas Constitution – Texas Public Policy Foundation
Elections, Transparency, & Accountability
• Political Reform in China: Elections, Good Intentions, and Income Distribution – Cato Institute
Foreign Policy/International Affairs
• The U.S. Must Fulfill Its Responsibility and Support Democracy in Hong Kong – The Heritage Foundation
• U.S. Foreign Assistance to Mexico, Guatemala, Honduras, and El Salvador – The Heritage Foundation
Health Care
• VA Paperwork Continues to Increase – American Action Forum
• How Competitive Private Plans Can Improve Care for Dual-Eligible Beneficiaries of Medicare and Medicaid – The Heritage Foundation
• Reinsurance, Risk Adjustment, and Risk Corridors in the Patient Protection and Affordable Care Act – The Heritage Foundation
Immigration
• Crisis at the Border: Throwing Money at the Problem Is Not a Solution – The Heritage Foundation
Information Technology
• Life, Liberty, and the Protection of Intellectual Property: Understanding IP in Light of Jeffersonian Principles – Free State Foundation
International Trade/Finance
• Chinese Global Investment Growth Pauses – American Enterprise Institute
• India’s Weak Patent Rights Hurt U.S. Pharmaceutical Trade – National Center for Policy Analysis
Labor
• The Cost of January’s Minimum Wage Hikes – American Action Forum
Monetary Policy/Financial Regulation
• Inflation Targeting: A Monetary Policy Regime Whose Time Has Come and Gone – Mercatus Center
• Legislation to Reform the Federal Reserve on Its 100-Year Anniversary – Mercatus Center
National Security
• UK Hard Power: Strategic Ambivalence – American Enterprise Institute
• The U.S. Needs an Integrated Approach to Counter China’s Anti-Access/Area Denial Strategy – The Heritage Foundation
Natural Resources, Energy, Environment, & Science
• Challenges for Wind Energy’s Future – Institute for Policy Innovation
• Prime the Pump: The Case for Repealing America’s Oil Export Ban – Manhattan Institute
Philanthropy
• The Stephen M. Silberstein Foundation – Capital Research Center
Regulation & Deregulation
• FDA’s Artificial Trans Fat “Ban”: A Dangerous Step to Control Personal Dietary Choices – The Heritage Foundation
The Constitution/Civil Liberties
• Saving Federalism – National Affairs
Transportation/Infrastructure
• A Metropoiltan Transportation Policy for National Growth – American Action Forum
• Transportation: Moving People and Commerce Where They Want and Need To Go – Center of the American Experiment
• Practical Congestion Relief for Mid-Sized Regions – Reason Foundation
Notes on the Week
What’s so compelling about mandated employer-provided health care? The Religious Freedom Restoration Act says government may impose a substantial burden on religious practice only if the burden is the least restrictive means of furthering a compelling government interest. Richard Epstein writes that in last week’s Hobby Lobby decision, neither the majority nor the dissenters on the Court adequately assessed the question of whether a compelling government interest was being served by the Department of Health and Human Services contraception mandate:
Unfortunately, Justice Alito simply assumes that the state has a compelling state interest in women’s healthcare, and jumps right to the question of whether the ACA adopts the “least restrictive means” toward that end. In her dissent, Justice Ginsberg insists, without opposition, that women’s health is a compelling state interest. Her argument is, however, wrong at every level. RFRA’s legislative history makes reference to two early Supreme Court cases, Sherbert v. Verner (1963) and Wisconsin v. Yoder (1972), which set a high bar against any claim of a compelling state interest. For example, Sherbert makes explicit reference to NAACP v. Button (1963) in which Justice Brennan resorted to a tough compelling state interest test to protect the NAACP against Virginia’s race neutral anti-solicitation law. RFRA carries that tough standard over to cases of religious liberty.
A more detailed analysis of the history of health and safety regulations confirms this interpretation. Today, by common consent, constitutional law cannot be used to strike down the ACA’s massive interference with freedom of contract. Before the New Deal, however, the applicable standard provided that the constitutional protection of freedom of contract yielded to federal or state regulation that used reasonable means to advance the health and safety of employees under the government’s residual police power. But not one decision during that period ever concluded that the police power extended to protecting personal healthcare unrelated to the workplace activities. Thus, states could pass a worker’s compensation law to deal with job-related injuries, or impose restrictions on exposure levels dangerous to female reproduction. But they could not require any employer to supply its female (or male) employees with a full set of healthcare services unrelated to their job. Only the constitutional repudiation of the pre-New Deal cases on liberty of contract made the ACA possible, for its limitations on contractual freedom are tested under the toothless rational basis standard.
Rational basis has no place under the RFRA, which requires the state to show that the supposed compelling interest in women’s healthcare justifies a statutory mandate that disrupts all preexisting practices whereby firms did not supply the mandated contraceptive services. But women’s healthcare is no more a compelling interest than men’s healthcare. The elaborate ACA legislative findings that uninsured women need healthcare fail miserably to explain the employer’s duty to subsidize anyone’s healthcare. Neither the ACA’s legislative history nor the Justice Ginsburg’s dissent identifies any systematic market disruption remotely comparable to natural disasters, domestic uprisings, and foreign invasions. The orderly private market for contraceptive services negates any government necessity to make employers pay for them. Nothing in the RFRA, of course, prevents the state from providing those benefits out of general revenues. [Hoover Institution, July 7]
Another point that both the majority opinion and the dissents seemed to assume is that mandating employers include contraception in employee health plans leads to cost-free access. But, as we pointed out last week, this notion is an economic illusion. [InsiderOnline.org, July 4] Here is liberal health policy wonk Uwe Reinhardt explaining the problem:
Imagine yourself in a bar where a pickpocket takes money out of your wallet and with it buys you a glass of chardonnay. Although you would have preferred a pinot noir, you decide not to look that gift horse in the mouth and thank the stranger profusely for the kindness, assuming he paid for it. You might feel differently, of course, if you knew that you actually had paid for it yourself.
Persuaded by both theory and empirical research, most economists believe that employer-based health insurance is an analogue of this bar scene.
The argument is that the premiums ostensibly paid by employers to buy health insurance coverage for their employees are actually part of the employee’s total pay package – the price of labor, in economic parlance – and that the cost of that fringe benefit is recovered from employees through commensurate reductions in take-home pay. [New York Times, July 1]
In a competitive labor market, employers who choose not to offer benefits that other companies provide will have to be more generous in salary in order to retain employees. This reality leads Reinhardt to knock the court’s majority for assuming that employers suffer an economic burden because of the mandate. He writes that “the case should help puncture the illusion that employer-provided health insurance is an unearned gift bestowed on them by the owners and paid with the owners’ money, giving those owners the moral right to dictate the nature of that gift.”
Actually it’s the government that dictates the nature of the gift while forcing employers to participate in the transaction. That forced participation—forced on pain of a paying a penalty for not providing the coverage—is the burden from which the owners of Hobby Lobby and Conestoga Wood sought relief. Forcing someone to choose between doing something that their religious faith says they cannot do and paying fines of tens of millions of dollars per year does impose a substantial burden on their religious practice.
The point about who’s really paying supports rather than refutes the conservative position. The conservative majority ruled against applying the mandate to Hobby Lobby and Conestoga Wood because it saw other less restrictive means of achieving the government interest. It didn’t really examine whether there is a connection between the policy and the government interest. But if the underlying economic reality isn’t changed by the existence of a mandate, then the mandate does not further the stipulated government interest of ensuring cost-free access. And in order for a policy to be the least restrictive means of furthering an alleged compelling government interest, it must be within the universe of policies that actually further that interest.
Does contraception kill? Some critics have argued that the religious objections of the Green and the Hahn families (owners, respectively, of Hobby Lobby and Connestoga Wood) to four of the 20 contraception services mandated by the Department of Health and Human Services are based on faulty science. Those beliefs, said the Supreme Court last week, were entitled to protection under the Religious Freedom Restoration Act.
Jen Gunter at New Republic presents the view of the critics, arguing that the science shows that the drugs Plan B and Ella have no mechanism of action other than preventing sperm and egg from meeting. She further argues that there is no evidence that IUDs adversely impact the likelihood of a fertilized egg from implanting.
Donna Harrison, like Gunter, is an obstetrician-gynecologist, and she disagrees. Here is the key bit from her dissection of Gunter’s views published at National Review
[Gunter] admits that IUDs change the lining of the uterus. Changing the lining of the uterus, by setting up an inflammatory reaction in the lining, is in fact the principal mechanism of action by which IUDs prevent embryos from implanting. And preventing an embryo from implanting kills the embryo. Thus the author contradicts the very claim that she is making. To say blithely that there is a higher “miscarriage” rate is to admit that the presence of an IUD causes loss of a pregnancy after implantation, which by any definition is called an abortion. So IUDs can end a human life, as the owners of Hobby Lobby and Conestoga Wood have claimed, and as the author admits.
And about Ella:
Ella is the same kind of drug as the abortion drug RU-486: They are both of the same class of drugs, called progesterone blockers. And they both are equally potent in blocking the action of progesterone, a hormone that a woman’s ovaries make to be able to nourish a pregnancy. If a woman takes RU-486 or Ella and hasn’t released an egg, it can delay egg release. If a woman takes RU-486 or Ella after she releases an egg, however, it can cause the embryo to die, either by preventing a woman’s ovary from making enough progesterone or by blocking the action of progesterone on the lining of the uterus, causing the mother’s side of the placenta to disintegrate. In fact, RU-486 is used in China as “emergency contraception.”
The evidence that Ella can kill embryos, even after they have implanted, comes from the research submitted to the FDA when Ella was being considered for approval. Two of these research studies looked at what happened to the pregnancies of women who got pregnant after taking the drug. In the first, five of six pregnancies with known outcomes ended in “miscarriage” for women who did not choose to abort. In the second study, four of six women “miscarried,” and the remaining two were lost to follow-up. “Miscarriage” means an embryo died. That’s how RU-486 and Ella work. They kill embryos.
In fact, this evidence was so damning that one of the FDA advisory panelists, Scott Emerson, a professor of biostatistics at the University of Washington, raised the point that the low pregnancy rate for women who take Ella four or five days after intercourse suggests that the drug must have an “abortifacient” quality. [National Review, July 8]
In evaluating freedom of religion claims, courts are not supposed to examine whether religious beliefs are valid but simply whether they are sincerely held. According to Harrison, however, the Greens and the Hahns have a more accurate understanding of the science then their critics.
Illinoisans also vote with their feet. The one-way rate to rent a 26-foot U-Haul truck from Chicago to Houston is 6.2 times the one-way rate to rent the same truck from Houston to Chicago, reports Mark Perry, who surmises that there must be a lot of trucks stranded in Texas. [AEIdeas, July 8]
What could be the explanation for so many more people moving from Illinois to Texas than from Texas to Illinois? J. Scott Moody and Wendy Warcholik have written a comprehensive report on Illinois’ migration patterns. They find that the folks leaving Illinois are going to states where estate taxes are lower (67 percent lower, as weighted by people moving) where union membership is lower (43 percent lower, as weighted by people moving) and temperature are higher (20 percent higher, as weighted by people moving). [“Policy Lessons from Illinois’ Exodus of People and Money,” Illinois Policy Institute, July 2014]
Some other comparisons: Illinois has the least trusted state government in the country, whereas Texas has one of the top-seven trusted state governments in the country, according to Gallup. Illinois ranks much worse on two widely cited-measures of economic freedom: the 2014 ALEC-Laffer Economic Outlook Rankings and the Mercatus Center’s 2013 Economic Freedom Rankings. Illinois is 48th and 37th respectively, in those rankings; Texas is 13th and 14th. [See: “Illinois Residents Least Trusting of Their State Government,” by Jeffrey M. Jones, Gallup, April 4, 2014; Rich States, Poor States: ALEC-Laffer State Economic Competitiveness Index, 2014, by Arthur Laffer, Stephen Moore, and Jonathan Williams; “Freedom in the 50 States 2013,” Mercatus Center. Also: “Why Are Some State Governments More Trusted than Others?” InsiderOnline, May 2.]
The Environmental Protection Agency wants even more administrative power over citizens. The Environmental Protection Agency has plans to garnish wages without a court order. That’s what it said in a Federal Register notice published on July 2. As Rob Gordon reports, the point of the order is not merely to obtain repayment of loans and such to the federal government, but also to enforce compliance with EPA regulatory orders by making it easier to collect fines that are themselves imposed only by administrative orders. Consider, for example, the case of Andy Johnson, a welder in Unita County, Wyoming:
The EPA issued an administrative order demanding that he destroy a pond he painstakingly built on his own property or face serious repercussions. The EPA has threatened Johnson with fines in the amount of $75,000 per day for violating the Clean Water Act. The pond’s waters are not polluted and the pond is much appreciated by wildlife, given the arid nature of Unita County. Johnson even sought regulatory approval from the state for his private effort to improve the environment. He did not however get a permit from the Army Corps of Engineers and consequently finds himself under the EPA’s thumb. Wyoming Senators Mike Enzi and John Barrasso joined with Louisiana’s David Vitter to issue a letter to the agency stating that the “EPA appears more interested in intimidating and bankrupting Mr. Johnson than it does in working cooperatively with him.” [Daily Signal, July 3]
And as David Addington notes in comments submitted to the EPA on behalf of The Heritage Foundation, the new EPA rule on garnishment stacks the deck in various ways against putative debtors seeking to appeal a garnishment order. In particular, the proposed procedures require the appellant to prove that the EPA’s position is wrong, rather than placing the burden of proof on the EPA. The EPA, by the way, is accepting comments on the notice until August 1.
ObamaCare still has fiscal problems, too. Ever since Democrats passed ObamaCare on a party-line vote, they’ve been running away from the parts of the law that were supposed to finance the new spending: the long-term care program (repealed), the individual mandate (postponed), the employer mandate (postponed), cuts to Medicare Advantage (dropped). Charles Blahous writes that a fiscal disaster is unfolding:
The ACA was enacted in 2010 with the promise of reducing the federal budget deficit while expanding health insurance coverage. Nearly lost amid the recent press cheerleading over ACA enrollment figures is that this promise has disintegrated, and now no one—including, notably, the Congressional Budget Office—can say how much fiscal damage the ACA will ultimately cause. All we know for certain is that many of the savings provisions designed to pay for it have been shelved thus far.
CBO currently estimates that the ACA’s coverage provisions will cost the federal government $92 billion a year by FY2015. This is roughly 0.5 percent of projected U.S. economic output for 2015, well exceeding the relative costs of Social Security and Medicaid at similar points in their histories. (The amount falls just short of the proportion of GDP absorbed by all of early Medicare.) Worse, the federal fiscal position was far weaker when the ACA was passed than when Social Security, Medicare, and Medicaid were created.
Troubling though the ACA’s startup costs are, they represent only the tip of the fiscal iceberg that will be the fully phased-in law. CBO projects that its annual costs will hit $200 billion by FY2020, or nearly 0.9 percent of GDP. Yet this assumes that lawmakers will be content to allow the ACA’s health insurance subsidies to grow more slowly than low-income beneficiaries’ health care costs, as the law now stipulates. Thus there is every reason to believe that the ACA’s eventual costs will far exceed initial estimates, as happened with Social Security, Medicare, and Medicaid. [Weekly Standard, July 14]
As Blahous says, it’s pretty much equivalent to what would have happened had Congress and President Roosevelt decided to roll back the payroll tax in 1937 while leaving Social Security benefits in place.
Video of the week: How do you like your foreign policy now? A short video report on how the Obama foreign policy is going:
[For some analysis see: “Why the Obama Foreign Policy Has Been a Disaster,” by Mackubin Thomas Owens, The Insider, Spring 2014.]
Big ideas: The Wall Street Journal is marking its 125th anniversary by asking its contributors to “propose one change in American policy, society or culture to revive prosperity and self-confidence.” There are more than a few good ideas on the list, but here are three that can’t be repeated often enough:
“Look to the states, not to Washington,” says Goldwater Institute President Darcy Olsen says:
The Framers understood that the rival of power is power, and the only power sufficient to rival Washington is the collective body of the 50 states. The Founders didn’t give us one constitution—they gave us 51. The Constitution provides a floor for freedom, not a ceiling. State constitutions can augment freedoms far above the federal baseline.
Skeptics say federalism is dead, states have become too dependent on Washington. That is too often true—but not always. When the Supreme Court gutted private-property rights with the Kelo decision in 2005, the solution didn’t come from Washington. Instead, 45 states strengthened their own constitutional protections. When the Obama administration threatened to impose “card check” rules to unfairly help unions organize businesses, the solution didn’t come from Washington. Instead, states drew up laws that are now protecting millions of workers.
“Pull the plug on crony capitalism,” says Hewlett-Packard CEO Carly Fiorina:
As Washington continues to expand overly complex and expensive tax codes and regulations, written by an alliance of corporate lawyers and government bureaucrats, the victims are the small-business owners who are the country’s backbone. As a result of these regulations-on-steroids, innovation, business creation and job growth are being stifled.
Who is looking out for innovative newcomers as well as the neighborhood dry cleaners, the corner taqueria, the coffee shop and the lawn-care company? Not Washington. Government bureaucracies like complexity because it keeps them busy and funded. Americans can see that too much government actually causes the problems that big new programs are meant to solve. Wall Street bailouts, the housing crisis and the tragedy of ObamaCare are just a few examples of overbearing government.
More small businesses are failing and fewer are starting than at any time in the past four decades. This trend must be reversed. Until it is, our economy will not produce the jobs we need, nor will we be ready to lead.
“Deregulate labor markets now,” says Hoover Institution fellow Richard Epstein:
Wide-ranging deregulation of labor markets would produce an immediate economic jolt without costing taxpayers a dime. Labor markets are hobbled every day by ever-more-intrusive regulations and taxes, with two costly consequences. First, they reduce the opportunities for gains from trade between employers and employees. Quite simply, if the cost of regulatory or tax compliance exceeds the joint gains from the transaction, the deal is off. Second, these regulations add huge administrative expenses, both in the direct costs of government enforcement and in private compliance costs. We should never spend tax dollars to reduce productive activity.
So we have to bid farewell to the egalitarian mantra that we can lift the nation up out of its doldrums by raising minimum wages to living wages, by tightening overtime regulation, by strengthening public and private unions, by expanding family-leave protection, by continuing with aggressive enforcement of the antidiscrimination laws based on race, sex and age, by imposing a health-care mandate on employers, and by extending unemployment benefits. The tragic truth is that these feel-good measures hit hardest at the bottom end of the labor markets, especially minority teenagers desperate to gain work experience. Employers won’t hire if they think that reforms are short-term gimmicks. Protectionist policies never work. But long-term stable reform could and should reverse those dismal unemployment and labor-participation figures. [Wall Street Journal, July 7]
Happy 125th, Wall Street Journal!
There is still bias in higher education. None of the top 50 colleges assign any conservative books in their reading programs for incoming freshman, finds a new survey by the Young America’s Foundation:
YAF surveyed the top 50 schools as noted by Forbes, and of the schools that institute a freshman reading program, no conservative books were assigned to incoming students over the past three years. The purpose of required reading, according to many of the schools implementing them, is to foster a sense of community among students through igniting university-wide discussions. Not surprisingly, YAF found that many of the “required” books only offered left-wing perspectives on topics such as race, feminism, socialism, inequality, and wealth redistribution. [Young America’s Foundation, July 2]
To Do: Find Out How Dodd-Frank Is Going
• Examine how the Dodd-Frank law has affected financial markets two years on. The Cato Institute will host a two-day conference on the subject at the Newseum in Washington, D.C. The event will begin at 10 a.m. on July 16.
• Get some ideas on how to fix the U.S. Department of Veterans Affairs. A panel at the American Enterprise Institute will discuss the topic at 10 a.m. on July 17.
• Confab with some of the top thinkers, leaders, and activists in the conservative movement at the Western Conservative Summit. Among the speakers: Gov. Bobby Jindal, Sen. Ted Cruz, Sen. Jim DeMint, Daniel Hannan, and John Andrews. The three-day summit will kick off on July 18 at the Hyatt Regency, Denver.
• Hear the stories of American servicemen who risked their lives for their country. The Heritage Foundation will host Mark Lee Greenblatt, author of Valor: Unsung Heroes from Iraq, Afghanistan, and the Home Front. Greenblatt will speak at noon on July 17.
• Interns, learn how to fight corruption in Washington, D.C., from one of the best watchdog groups in the business. Judicial Watch will host a seminar that teaches you have to use freedom of information laws and other tools to investigate and uncover misconduct by government officials. The seminar will begin at 11 a.m. on July 18 at Judicial Watch in Washington, D.C. Register for the event by emailing: jwevents@judicialwatch.org.
• See an inspiring movie about food cart entrepreneurs, and while you are at it enjoy some food truck fare, too. The James Madison Institute will screen the movie Dog Days at the All Saints Cinema in Tallahassee at 7:30 p.m. on July 18. Food trucks will be on hand at 6:30 p.m. to serve delicious BBQ.
(Want more stuff to do? Check out InsiderOnline’s Conservative Calendar.)
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