The Heritage Insider: Legislative history shows court got Halbig right, Medicaid expansion dwarfs private coverage growth, another win for gun rights, and more
Updated daily, InsiderOnline 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.
August 2, 2014
Latest Studies: 43 new studies, including a Competitive Enterprise Institute report on why the EPA’s climate rule is illegitimate, and an Independent Women’s Forum report on how educational freedom benefits women
Notes on the Week: Legislative history shows D.C. Circuit got Halbig right, Medicaid expansion dwarfs private coverage growth, another win for gun rights, and more
To Do: Defend state sovereignty
Budget & Taxation
• The Future of America’s Entitlements: What You Need to Know About the Medicare Trustees Report – American Action Forum
• The Unseen Costs of Tax Cronyism: Favoritism and Foregone Growth – American Legislative Exchange Council
• Why California Dissolved Its RDAs – Cato Institute
• An Economic and Fiscal Comparison of Alberta and Other North American Energy Producing Provinces and States – Fraser Institute
• Congress Should Fund Wildfire Suppression Without Creating a New Spending Loophole – The Heritage Foundation
• A Legislator’s Guide to Delivering Better Service at a Better Price – Kansas Policy Institute
• Establishing a Minimum Wage for Contractors – Mercatus Center
• Pension Reform Handbook: A Starter Guide for Reformers – Reason Foundation
• Teacher Pension Enhancement in Missouri: 1975 to the Present – Show-Me Institute
• What Would Piketty’s 80 Percent Tax Rate Do to the U.S. Economy? – Tax Foundation
The Constitution/Civil Liberties
• Obama’s LGBT Blunder – Hoover Institution
Crime, Justice & the Law
• The Case for the Smarter Sentencing Act – The Heritage Foundation
Economic Growth
• Increasing Economic Opportunity for African-Americans: Local Initiatives that Are Making a Difference – American Enterprise Institute
• The Sharing Economy: A Positive Shared Vision for the Future – Free State Foundation
• America’s Opportunity City – Manhattan Institute
Education
• Student Achievement and Prosperity – Center of the American Experiment
• How Educational Freedom Benefits Women – Independent Women’s Forum
• The Plot Against Merit – Manhattan Institute
• Seeds of Achievement: AppleTree’s Early Childhood D.C. Charter Schools – Pioneer Institute for Public Policy Research
Foreign Policy/International Affairs
• Khamenei’s Team of Rivals: Iranian Decision-Making, June-July 2014 – American Enterprise Institute
• China Ascendent? – Hoover Institution
Health Care
• Intellectual Property Underpinnings of Pharmaceutical Innovation: A Primer – American Action Forum
• The Affordable Care Act’s Risk Spreading Mechanisms: A Primer on Reinsurance, Risk Corridors, and Risk Adjustment – American Action Forum
• Even If You Like Your Plan, You May Well Lose Your Plan. And Even If You Like Your Doctor, You May Well Lose Your Doctor. – American Enterprise Institute
• New Obamacare Enrollment Data: Employer-Based Coverage Declines – The Heritage Foundation
• The Mechanics of Medicaid – John Locke Foundation
Immigration
• Brief Analysis of the House Republican Leadership’s Secure the Southwest Border Supplemental Appropriations Act and the Secure the Southwest Border Act of 2014 – Center for Immigration Studies
• Immigration Working Group Recommendations Fall Short – The Heritage Foundation
Information Technology
• The Questionable Call for Common Carriage – Cato Institute
International Trade/Finance
• A Case against Child Labor Prohibitions – Cato Institute
• Congress Should Upgrade the African Growth and Opportunity Act – The Heritage Foundation
• China Needs a New Way to Manufacture Export Growth – Hudson Institute
Labor
• A Federal Minimum Wage and the States – Cato Institute
• The Unintended Consequences of Collective Bargaining – Competitive Enterprise Institute
Monetary Policy/Financial Regulation
• Should Penny Auctions Be Regulated Under Gaming Law? – Cato Institute
Natural Resources, Energy, Environment, & Science
• Alabama’s Environment 2014: Six Critical Indicators – Alabama Policy Institute
• EPA’s Illegitimate Climate Rule – Competitive Enterprise Institute
• Gene-Spliced Crops for the Dry Years – Hoover Institution
Regulation & Deregulation
• FDA’s Animal Food Regulation Is for the Birds – Cato Institute
• Operation Choke Point: What It Is and Why It Matters – Competitive Enterprise Institute
Retirement/Social Security
• Hard Lessons for Institutional Investors from the MBTA Retirement Fund – Pioneer Institute for Public Policy Research
Transportation/Infrastructure
• Rapid Bus: A Low-Cost, High-Capacity Transit System for Major Urban Areas – Cato Institute
Welfare
• SSDI Program Growth Will Continue Unless Fundamental Reforms Are Implemented – American Enterprise Institute
Notes on the Week
Legislative history supports the Halbig decision against subsidies in the federal exchanges. Liberals are busy complaining that the D.C. Circuit’s decision in Halbig v. Burwell makes a total mess of ObamaCare by ruling that the law does not provide subsidies in the federal exchanges. It’s a ruling that will affect the residents of the 36 states where there are federal instead of state exchanges. Meanwhile, liberal blogger Greg Sargent has undercut liberals’ arguments on the matter. Writes Sargent: “The first Senate version of the health law to be passed in 2009—by the Health, Education, Labor and Pensions Committee—explicitly stated that subsides would go to people on the federally-established exchange.” Sargent then notes that the language authorizing the subsidies in federal exchanges was replaced when the HELP bill was merged with the bill produced by the Senate Finance committee. That bill contained no federal exchanges and stipulated that the subsidies are available “through an Exchange established by the State.” [Washington Post, July 29]
So first the subsidies were in the bill; then they weren’t. Surely an important detail. The funny thing about Sargent’s column, though, is that he thinks this revelation proves the Senate intended for there to be subsidies in the exchanges. Sargent’s narrative essentially revives the idea of a drafting error that was created in the process of merging the two bills. While that interpretation is plausible, perhaps it is more likely that the Senate dropped the language creating subsidies in the federal exchanges because it wanted to drop the subsidies in the federal exchanges.
As James Taranto points out:
To the extent that legislative history is relevant in adducing legislative intent, the Senate’s having abandoned the language providing for subsidies on the federal exchange is evidence of intent not to enact that language.
“Where Congress includes limiting language in an earlier version of a bill but deletes it prior to enactment, it may be presumed that the limitation was not intended,” Justice Harry Blackmun wrote for a unanimous Supreme Court in Russello v. U.S. (1983). In Immigration and Naturalization Service v. Cardoza-Fonseca (1987), Justice John Paul Stevens observed (quoting an earlier opinion from Justice Potter Stewart): “Few principles of statutory construction are more compelling than the proposition that Congress does not intend sub silentio to enact statutory language that it has earlier discarded in favor of other language.” [Wall Street Journal, July 30]
But here’s an idea: Why don’t we look at the words in the laws that Congress passes to see if we can find a congressional intent? In the case of subsidies for purchasing health care, the Affordable Care Act says the subsidies are available “through an Exchange established by the State.” Peter Suderman writes that interpreting that language as limiting the subsidies to state exchanges is “not just common sense”:
It’s also the conclusion of the Congressional Research Service, which wrote in a July 2012 report that “a strictly textual analysis of the plain meaning of the provision would likely lead to the conclusion that IRS’s authority to issue the premium tax credits is limited only to situations in which the taxpayer is enrolled in a state-established exchange.” Even legal authorities that have ultimately agreed with the administration seem to agree. A separate ruling by the U.S. Court of Appeals for the 4th Circuit last week sided with the administration’s interpretation, but admitted that “a literal reading of the statute undoubtedly accords more closely with [the] position” of the challengers.
A literal reading of an unambiguous statute ought to be enough to determine what a law means—and to rule that a regulation that goes well beyond the strict text of the statute is out of bounds. [Reason, July 29]
ObamaCare “fixed” health care by expanding the part that was most broken. Increases in Medicaid enrollment dwarf increases in private health insurance during the first six months of the ObamaCare exchanges, report Edmund Haislmaier and Drew Gonshorowski. Using data from health insurer reports to state regulators, they calculate that enrollment in individual policies increased by 2.2 million people, while enrollment in the employer-based policies declined by 1.7 million for a net gain of about half a million people covered by private health insurance. Medicaid enrollment over the same period increased by nearly 5 million people. Haislmaier and Gonshorowski note that it is possible that 3 million to 4 million people have gained private insurance who have not yet been counted by official reports. At best, however, the gain in private insurance equals the gain in Medicaid coverage. [The Heritage Foundation, July 28]
And Medicaid is a bad deal for those enrolled in the program, as Hadley Heath explains:
Nationally, for every dollar of primary care received by someone with employer-sponsored insurance in 2008, Medicaid only paid 52 cents. That means that doctors received just about half of the payment for treating a Medicaid patient that they did from someone with private insurance.
Not surprisingly, because of this broken payment structure, Health Affairs reports that only 70 percent of physicians accept Medicaid patients. This makes it difficult for Medicaid patients to get appointments with private physicians. The health outcomes for Medicaid patients confirm they are not receiving a high quality of care: A University of Virginia Study shows that surgical patients on Medicaid are 13 percent more likely to die than patients with no insurance at all. They are 97 percent more likely to die than those with private insurance. The poor standard of care for Medicaid patients has resulted in severe harm and in some cases, even death. [“Medicaid: Don’t Expand a Broken System,” Independent Women’s Forum, May 2013]
And Brian Blase notes some other research finding that Medicaid may actually be hazardous to your health:
Rachel Rapaport Kelz and her colleagues found, for example, that after colon cancer surgery, Medicaid patients had a 22 percent greater chance of complications and a 57 percent greater chance of dying in the hospital than the privately insured. The risk for uninsured individuals was in the middle—less than the risk for Medicaid recipients and greater than the risk for individuals with private coverage. Kathleen McDavid and her colleagues found lower cancer survival rates for Medicaid enrollees. The risk of mortality for individuals with Medicaid was higher than the risk for the privately insured by 56 percent for colorectal cancer, 14 percent for lung cancer, 66 percent for female breast cancer, and 149 percent for prostate cancer. Of three of the four measures, Medicaid recipients had a higher risk of mortality than the uninsured. [Internal citations omitted.] [“Medicaid Provides Poor Quality Care: What the Research Shows,” The Heritage Foundation, May 5, 2011]
[See also: How Medicaid Fails the Poor, by Avik Roy, Encounter Books, November 2013.]
No, Medicare has not been fixed. ObamaCare strengthened Medicare’s finances by pushing its point of insolvency back four years to 2030, say the Medicare trustees in their annual report released this week. The Social Security trustees released their annual report this week, too. The delayed insolvency for Medicare means nothing for the long term health of the program, says Doug-Holtz Eakin: “[B]oth programs are fiscal toast and need immediate reforms to continue to provide future seniors with an appropriate safety net.”
Social Security (over $10 trillion) and Medicare (over $9 trillion) will both run sustained deficits over the next 75 years of each program. Social Security ($70 billion) and Medicare ($290 billion) are running cash deficits right now, so the problems are not abstract or simply far into the future. Because their respective trust funds — elaborate federal accounting mechanisms, not money — will turn negative in the next 20 years, seniors face abrupt, across-the-board meat cleaver cuts in their benefits unless real reforms are enacted.
Now, turn to the good news. Medicare is projected to last another 4 years compared to last year. Yippee!!! The terminally-ill patient may live another week! Hooray! It is nothing really major to celebrate, and, given the uncertainties about such projections, could easily be undone in next year's report. Moreover, the supposed help from Obamacare exists only on paper. Yes, the new surtaxes on high-income individuals are dedicated to the Medicare trust fund. In reality, however, the federal government is still running multibillion dollar deficits and those monies are long since spent. Yes, there are planned cuts to hospitals, Medicare Advantage, Medicare home health, and other providers. Unfortunately, the leading edge of those cuts has already led to the elimination of 24 percent of MA plans and has dramatically hurt home health agencies. From a policy perspective, both outcomes are undesirable and unsustainable. So, a future Congress will doubtless be forced to waive the cuts just as it annually has waived the cuts to Medicare physicians. No real cuts are on the books. [American Action Forum, July 29]
President Obama could learn from President Lincoln. Eliot Cohen writes:
By 1864, Lincoln, Grant and Grant’s no-less-grim lieutenants William Tecumseh Sherman and Philip Sheridan had concluded that their conflict had shifted to what historians call “the hard war.” They knew not only that they would have to destroy the armies of the Confederacy but also that they would have to break the will of the people of the South to wage war. […]
The Israelis, having left Gaza only to be showered by rockets and harried by border raiders, have concluded that they are waging that kind of war. In a rare spirit of unity, they seem determined to break Hamas in Gaza. A more sensible U.S. administration would understand that and stand with our tough little ally, rather than attempt to stop its destruction of this Islamist partner of Iran and enemy not only of Israel but of Egypt and Saudi Arabia as well.
The problem is not the reported antipathy between President Obama and Israeli Prime Minister Benjamin Netanyahu. It is that the Obama administration simply cannot accept that war is war. This explains, among other things, the debacle of our Libya policy, in which the administration studiously insisted that its bombing to help overthrow Moammar Gaddafi was not a war and left in its wake chaos that roils to the present day. It explains the administration’s declarations that drone strikes in Pakistan and the assassination of Osama bin Laden had brought al-Qaeda to the edge of strategic defeat — even as the ideology of the group and similar ones has metastasized and Islamist movements have extended their sway in the Middle East and Africa. [Washington Post, July 31]
As Cohen goes on to note, an unwillingness to accept what war is also explains the administration’s policies on Syria and Russia. [More on the theme: “Why the Obama Foreign Policy Has Been a Disaster,” by Mackubin Thomas Owens, The Insider, Spring 2014.]
How would the economy do under Piketty’s proposed taxes? Thomas Piketty’s much-hailed Capital in the Twenty-First Century proposes much higher taxes on income and capital gains in order to address what he sees as the biggest economic problem: rising inequality. But higher taxes reduce the reward that people receive for working and investing, encouraging them to work and invest less. How would that affect the economy? Here is what the Tax Foundation’s economic model predicts:
If ordinary income were taxed at the top rates of 80 and 55 percent, our model estimates that after the economy adjusts, total output (GDP) would be 3.5 percent lower, wage rates would drop 1.6 percent, the capital stock would be 7.4 percent less, and there would be 2.1 million fewer jobs.
If capital gains and dividends were taxed at the new tax rates along with ordinary income, the economic damage would be much worse. GDP would plunge 18.1 percent (a loss of $3 trillion dollars annually in terms of today’s GDP), the capital stock would be 42.3 percent smaller than otherwise, wages would be 14.6 percent lower, 4.9 million jobs would be lost, and despite the higher tax rates, government revenue would actually fall.
Although Piketty’s proposed income tax increase may appear to target only upper-income taxpayers, all income groups would suffer from the economic fallout.
Our model estimates that the after-tax incomes of the poor and middle class would drop about 3 percent if the higher rates do not apply to capital gains and dividends and about 17 percent if they do. [Tax Foundation, July 28]
And that doesn’t even count the effects of Piketty’s proposed wealth tax, which the Tax Foundation doesn’t model and is pretty unlikely anyway.
Your property could become the police’s property—even if you do nothing illegal. Civil asset forfeiture is a growing national scandal and the Institute for Justice is on it with a new initiative to promote reforms of the laws. Under state and national civil forfeiture laws, police can seize your property if they believe it been used in a crime. When that happens, the only way to get your property back is to prove that the police are wrong. If you can’t do that, they get to keep the property or sell it and use the proceeds to pad their budgets. That’s true even if nobody is convicted of the crime in which the property was supposedly used. This set-up gives police the incentive and the means to steal your property—legally.
The Institute for Justice has been writing about the problem for years. Here is a video overview the institute has produced:
The group has also produced a number of reports on the topic, including “Policing for Profit: The Abuse of Civil Asset Forfeiture,” (by Marian R. Williams, et al., March 2010). These and other resources on the issue are available at IJ’s new website: EndForfeiture.com.
Sen. Rand Paul and Rep. Tim Walberg have introduced reform bills in the Senate and the House of Representatives, respectively. Rep. Walberg spoke about the issue at The Heritage Foundation on Wednesday along with IJ’s Scott Bullock, and the Washington Post’s Radley Balko:
Video of the week: The Lego Movie shows why central planning can’t work. If you thought The Lego Movie had to be an anti-free market screed since it featured a character called President Business, then you were wrong. Let’s go to the video tape with Andrew Heaton and EconPop:
Worker freedom is good for workers. Giving workers the right to not join a union may not be good for unions, but it is good for workers. Richard Vedder and Jonathan Robe find that there is considerable evidence that states with right-to-work (RTW) laws attract more capital than non-RTW states. More capital leads to higher wages and higher wages leads to a net-inflow of workers moving to RTW states from non-RTW states. RTW laws forbid making union membership or paying union dues a condition of employment. Vedder and Robe note:
Over the 35-year period [1977-2012], nationwide total employment grew by 71 percent. RTW states significantly outpaced this average, with employment growing by 105.3 percent. Non-RTW states lagged behind both, with an employment growth of only 50.0 percent. […]
[F]rom 2000 to 2009 more than 4.9 million native-born Americans moved from non-RTW to RTW states—an average of more than 1,450 persons per day. […]
A 2003 study by economist Robert Reed, then at the University of Oklahoma, helps clear some of the ambiguity by demonstrating that when one controls for the economic conditions of a state prior to its adoption of a RTW law, the relationship between RTW and wages is positive and statistically significant. Reed estimates that when “holding constant economic conditions in 1945—average wages in 2000 [were] 6.68 percent higher in RTW states than [in] non-RTW states.” […]
The total estimated income loss in 2012 from the lack of RTW laws in a majority of U.S. states was an extraordinary $647.8 billion—more than $2,000 for every American, including those in RTW states. [“An Interstate Analysis of Right to Work Laws,” by Richard Vedder and Jonathan Robe, Competitive Enterprise Institute, July 16]
Toolkit: raising transformational gifts. Are you trying to figure out how to identify prospective givers of transformation gifts? Daniel Erspamer of the State Policy Network has written a brief outline of practices to follow. Here are the first three items:
Build & Maintain a Priorities Plan: It should be updated in real time and be your guide for your relationship-building efforts. Make sure it captures all of the supporters and probable supporters in your portfolio. A plan should be built for each. This also means keep an eye on gifts as they come in. Research new supporters in real time. Reevaluate often.
Execute Your Plan: Make your calls. Write your notes. Be creative. Measure your progress. Every day—this includes when you are on the road. Use your plans to keep you honest and on track in building real, meaningful, long-term and productive relationships with key investors.
Place the Order: You’ve got to ask for significant gifts. Relationships matter deeply, and they’re the foundation of it all. But, we are also responsible for paying to make dreams reality. Remember, we aim for transformational donor partners. Paint a powerful picture and be persuasive in asking for investments.
For the rest of Erspamer’s action plan, see “Eleven Irrefutable-ish Rules to Raise Transformational Gifts” in the March/April 2014 issue of SPN News.
A victory for the right to carry a gun for self-defense. Last Saturday, the United States District Court for the District of Columbia struck down the District of Columbia’s ban on carrying handguns outside the home. In the 2008 case of District of Columbia v. Heller, the Supreme Court struck down the city’s gun laws that effectively amounted to a ban on gun ownership. The city rewrote its laws to allow ownership, but made it illegal to carry guns outside the home. Tom Palmer, who works for the Atlas Economic Research Foundation and who was one of the original plaintiffs in the case that became Heller, sued with the help of the Second Amendment Foundation. He was represented by Alan Gura, the lawyer who argued Heller before the Supreme Court.
Judge Frederick J. Scullin, Jr., citing the Supreme Court’s recent precedents in Heller and MacDonald v. Chicago (2010) found that the Second Amendment right to keep and bear arms includes the right to carry them outside the home for the purpose of self-defense. Here are the key passages from the opinion in Palmer v. District of Columbia:
As the Court noted in Heller, “Constitutional rights are enshrined with the scope they were understood to have when the people adopted them, whether or not future legislatures or (yes) even future judges think that scope too broad.” […]
As the court noted in Peruta, “[t]he Second Amendment secures the right not only to ‘keep’ arms but also to ‘bear’ them[,]”; and, as the Supreme Court explained in Heller, “[a]t the time of the founding, as now, to ‘bear’ meant to ‘carry[,]’” “Yet, not ‘carry’ in the ordinary sense of ‘convey[ing] or transport[ing]’ an object, as one might carry groceries to the check-out counter or garments to the laundromat, but ‘carry for a particular purpose—confrontation.’” According to the Heller majority, the “natural meaning of ‘bear arms’” was the one that Justice Ginsburg provided in her dissent in Muscarello v. United States, that is “‘wear, bear, or carry … upon the person or in the clothing or in a pocket, for the purpose … of being armed and ready for offensive or defensive action in a case of conflict with another person.’” Furthermore, “‘bearing a weapon inside the home’ does not exhaust this definition of ‘carry.’ For one thing, the very risk occasioning such carriage, ‘confrontation,’ is ‘not limited to the home.’” Moreover, it is beyond dispute that “the prospect of conflict at least, the sort of conflict for which one would wish to be ‘armed and ready’ is just as menacing (and likely more so) beyond the front porch as it is in the living room.” Thus, “‘[t]o speak of “bearing” arms within one’s home would at all times have been an awkward usage.’” In addition, the Heller Court stated that the Second Amendment secures “the right to ‘protect[] [oneself] against both public and private violence,’ … thus extending the right in some form to wherever a person could become exposed to public or private violence.”
Moreover, the Heller Court emphasized that the need for the right was “most acute” in the home, “thus implying that the right exists outside the home, though the need is not always as “‘acute.’” (“[T]he Second Amendment protects a personal right to keep and bear arms for lawful purposes, most notably for self-defense within the home.”)). However, Heller also pointed out that “laws forbidding the carrying of firearms in sensitive places such as schools and government buildings” is presumptively lawful. Finally, “both Heller and McDonald identif[ied] the ‘core component’ of the right as self-defense, which necessarily’ take[s] place wherever [a] person happens to be,’ whether in a back alley or on the back deck.” ][…]
Thus, having concluded that carrying a handgun outside the home for self-defense comes within the meaning of “bear[ing] Arms” under the Second Amendment, the Court must now ask whether the District of Columbia’s total ban on the carrying of handguns within the District “infringes” that right.
This question is not difficult to answer. As the Seventh Circuit stated in Moore v. Madigan, “[a] blanket prohibition on carrying gun[s] in public prevents a person from defending himself anywhere except inside his home; and so substantial a curtailment of the right of armed self-defense requires a greater showing of justification than merely that the public might benefit on balance from such a curtailment, though there is no proof that it would.” [Internal citations omitted.] [Palmer v. District of Columbia, Opinion of the Court, July 26, 2014]
To Do: Defend State Sovereignty
• Discover how states can maneuver to defend their sovereignty against federal power grabs. The Texas Public Policy Foundation will host a policy primer on the topic: “When the Feds Go Rogue: The States’ Duty to Respond.” The event will begin at 11:30 a.m. on August 7 at the Legislative Conference Center of the Texas State Capitol in Austin.
• Coloradans, gain the leadership skills necessary to win battles for liberty. The Leadership Program of the Rockies is accepting applications for its 2014-2015 program until August 31. The program’s nine full-day sessions—held on the second Friday of each month from October to June—will equip you with the skills to be a principled leader for liberty.
• Explore the history of libertarianism and the Cato institute at a special networking happy hour. Cato will raffle off special prizes for those who enter via Instagram posts. The happy hour will begin at 6 p.m. on August 6 at the institute’s Ken and Frayda Levy Roof Garden.
• Get started in video journalism with Reason TV’s Searle Film Fellowship. Reason is looking for talented individuals interested in advancing the message of free minds and free markets through video journalism. The fellowship is a year-long, full-time position that provides the opportunity to create original content exploring politics and culture through a libertarian lens. Applicants of all levels of experience will be considered.
(Want more stuff to do? Check out InsiderOnline’s Conservative Calendar.)
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