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CAT | Politics

One of the most important things I have learned is that every choice we make in life has costs and benefits. If I use my only $5 to purchase a latte, I give up the ability to purchase something else with the $5. It’s an elementary principle, but somehow we forget it when we talk about big-picture things.

The Affordable Care Act is an example of this basic lesson. A simplified version of the argument for the ACA is that the President and his supporters wanted to ensure that everyone was covered by health insurance, and that being old or sick would not cause one’s putative insurance rates to be so high that he could not afford to purchase insurance. The ACA also redistributes money to the poor and lower middle class so that they can purchase health insurance for free or at a discounted rate.

By itself, this idea sounds great. No one, except the most partisan, could argue that it would be a good thing if, all else equal, all those who currently don’t have the opportunity to purchase affordable health insurance magically had the opportunity to purchase affordable coverage that they desired.

Unfortunately, it’s not that simple, because things cost money. To pay for the benefit of expanding coverage, which costs money, we have to find a source of revenue. The ACA’s proponents have claimed that this revenue will come from people buying into the health insurance system who otherwise would not have done so, and the money from those individuals being redistributed to benefit the poor, old, and sick. The ideal situation, according to the ACA’s proponents, is that lots of young, healthy individuals will buy in to the system. The unspoken logic is that such individuals will effectively pay the way for others have affordable healthcare coverage. The ACA’s proponents also believe that the new law will result in some limited efficiency gains, such as lowering dependence on emergency room visits by substituting preventative care, though no one seriously contends that these efficiency gains pay for the bulk of the cost (and it’s up for debate whether the law actually makes insurance less efficient). That’s why the ACA includes the individual mandate, which requires individuals to purchase insurance or pay a penalty. And that’s also why the ACA makes illegal insurance policies that provide “sufficient” coverage. The point is to require the young and healthy to buy in, and to pay not only for insurance coverage they think they’ll use, but intentionally to get them to pay for insurance coverage they almost certainly won’t use, so that this coverage will be cheaper for the law’s beneficiaries.

To put it another way, because the bulk of the cost must be paid for the young and healthy, they, as a group, are the “losers” of the ACA, whereas the old, poor, and sick are the “winners.” The cost that can’t be paid for by the young and healthy will be paid for through increased premiums, so to the extent one’s insurance premiums go up, one is also a “loser” whose costs are distributed to the law’s “winners.” (Additionally, to the extent the law leads to increased taxes, those paying the taxes are also “losers.”)

Moreover, for the reasons discussed above, no one can seriously contend that the ACA is “free.” That is, if we’re going to expand health insurance coverage, it’s going to cost a positive dollar amount. Given the number of uninsured and seniors (e.g. baby boomers) in this country, this will be a substantial dollar amount.

Therefore, in arguing over whether the ACA is good policy, the question is not simply whether you believe that it is good that everyone has health insurance, or whether you believe that we should spend less. This is not the question because for every story about a family who is able to buy health insurance at a lower rate, there is a story about a family that must cut back because they have to pay a higher rate. The question instead is whether the expansion is worth the cost and redistribution of wealth. For a number of reasons, I have my doubts that it is. For example:

  • Why are we redistributing even more wealth from the young to the old? The old in the US consume so many resources, have the benefit of social security (which may not be around for the young), and have passed the buck of the nation’s crippling debt onto the young. Moreover, a huge percentage of the old in the country have not saved for retirement and will likely need to be “bailed out” using the resources of the young.
  • Why won’t the ACA’s proponents frame the issue of the ACA as the trade off that I have labeled it here? They speak as if the law will cause no one to pay a single penny more. But as we’ve learned from the President’s embarrassing about-face instructing insurers that he won’t enforce the part of the ACA that required them to cancel plans that were not deemed sufficient by the law (which is plainly unconstitutional and practically a disaster), the law clearly is a trade off.
  • So far, we’ve heard far more about “losers” than “winners” in the news; that is, we haven’t heard many stories about people or families saving money, but we’ve heard lots about insurance rates going through the roof. Particularly embarrassing for the President was using an anecdote of a woman who thought she had saved money under the ACA, but then learned the rate that she was originally offered was a computer error and her true price was far higher.
  • Many of the uninsured who have pre-existing conditions today were once young and healthy, and chose not to purchase insurance when they were younger. They took the benefit of not buying insurance (saving money) when they were young, and bore the risk that they might be unable to purchase affordable coverage if they developed a health condition while uninsured. Under the ACA, however, they are bailed out of the consequences of their risk, on the backs of the present young and healthy who no longer get to make the same choice. This is simply a wealth transfer from young to old.

This doesn’t mean that the concept of expanding health insurance coverage is a bad thing. Perhaps to you, you believe that the concept of universal health insurance is so valuable that it is priceless, which justifies your belief that the benefit is worth the cost. (Though I would disagree that anything is “priceless,” and would ask why the burden should be on the young and healthy to fund your belief.)

What is to be done about this? I don’t agree with the tactics of the Tea Party to threaten the apocalypse if the ACA is not repealed. But I do think that the President needs to be more flexible in discussing substantial modifications to the ACA. The law is not a panacea, and should never have been marketed that way. I would be interested in seeing amendments that, for example, place heavier burdens on well-to-do seniors, or focus more heavily on actual efficiency improvements as opposed to wealth redistribution.

 

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Mitch McConnell has proposed a new way to deal with the debt ceiling issue:

Under Mr. McConnell’s plan, Congress would pass legislation authorizing the president to request a total $2.5 trillion debt-limit increase in three stages—$700 billion by Aug. 2 followed later in the year by two $900 billion installments. The increases could take effect without congressional approval, but Congress could block it with a resolution of disapproval.

In general, under McConnell’s plan: (1) the President is required to propose the debt-limit increase; (2) Congress can respond with a “resolution of disapproval,” which requires a vote of a majority of each house; (3) the President can veto that resolution, which presumably he would; and (4) Congress can attempt to override that veto with a 2/3 supermajority in both houses.  The purpose of the plan is that Republicans can place the blame (some individuals find raising the debt ceiling unpopular) for raising the debt ceiling on the President, because there is no chance that 2/3 of both houses would vote against raising the debt ceiling.

Such a plan is likely unconstitutional under the Supreme Court’s decision in I.N.S. v. Chadha, 462 U.S. 919 (1983).

 

A. Chadha

In Chadha, Congress passed an Act which allowed the Immigration and Naturalization Service (INS) to suspend deportations of illegal aliens.  However, the Act further specified that Congress could reject the INS’s decision to suspend deportation, and that, to do so, either house of Congress merely needed to pass a resolution of disapproval, with a majority vote.

After Congress passed such a resolution of disapproval, the resolution, and Act, were challenged and eventually were reviewed by the Supreme Court.  The Court held that the Act was unconstitutional.

The Court wrote that, when one of the three branches of the government acts, it must act according to the procedures set forth in the Constitution. Importantly, the Constitution sets forth a specific procedure Congress must follow when it takes a legislative act, meaning doing something like passing a bill, but not simply making internal Congressional rules.

Specifically, when taking a legislative act, except in limited circumstances spelled out in the Constitution (such as impeachment), the Constitution only allows Congress to act through “bicameralism” and “presentment.”  “Bicameralism” means passage by both houses, and “presentment” means presenting the passed bill to the President for signature or veto.

In Chadha’s case, the Act allowed Congress to take a legislative act (passing a resolution of disapproval) without bicameralism or presentment, because either house could pass the resolution of disapproval, and the President didn’t get to sign or veto the resolution.  Thus, the Act was unconstitutional.

To dispel any argument that such a ruling would cause inefficiencies, the court explained, in one of my favorite Supreme Court lines of all time:

The choices we discern as having been made in the Constitutional Convention impose burdens on governmental processes that often seem clumsy, inefficient, even unworkable, but those hard choices were consciously made by men who had lived under a form of government that permitted arbitrary governmental acts to go unchecked. There is no support in the Constitution or decisions of this Court for the proposition that the cumbersomeness and delays often encountered in complying with explicit Constitutional standards may be avoided, either by the Congress or by the President. See Youngstown Sheet & Tube Co. v. Sawyer, 343 U.S. 579, 72 S.Ct. 863, 96 L.Ed. 1153 (1952). With all the obvious flaws of delay, untidiness, and potential for abuse, we have not yet found a better way to preserve freedom than by making the exercise of power subject to the carefully crafted restraints spelled out in the Constitution.

I.N.S. v. Chadha, 462 U.S. 919, 959 (1983).

 

B. McConnell’s Plan

McConnell’s plan is slightly different than that in Chadha.  Unlike Chadha, it does not authorize a single house to take “legislative action.”  However, it does allow the President, as opposed to Congress, to take legislative action, and allows Congress to effectively have a veto power over the President.  Thus, Chadha, as well as the Constitution, suggests that McConnell’s plan is unconstitutional.

First, Article 1, Section 8, lists Congress’ powers, and Clause 1 of that Section states that “[t]he Congress shall have Power . . . . to pay the Debts . . . .”  It is Congress’ role to “pay the Debts,” which, throughout our nation’s history, has meant that Congress proposes the plan to pay the debts, and the President signs or vetoes, and then Congress can override a veto.  In other words, to “pay the Debts,” bicameralism and presentment must be followed.

However, under McConnell’s plan, the roles of Congress and the President are flipped.  The President is the one who must propose “legislation,” and then Congress effectively gets veto power over the proposal.  To pass this “legislation” (i.e. raise the debt), Congress would not need a vote from both houses (bicameralism) – rather, they would only need one house NOT to pass a resolution of disapproval (because if both houses don’t vote to disapprove, the debt increase occurs).  If both houses passed such a resolution, and the President then vetoed it, then only one-third of one house could ensure that the debt ceiling would be passed, because the only way to stop the debt ceiling increase at that point would be to have 2/3 of each house vote against the debt ceiling increase (to override the President’s “veto”).

In other words, under McConnell’s plan, there is no ordinary bicameralism and presentment process.  Instead, Congress simply abdicates its power under the Constitution to “pay the Debts.”  Hence, McConnell’s plan is unconstitutional.

 

C. Aside: Political Accountability

As an aside, one of the main checks against the power of Congress and the President is accountability to the people.  The purpose of McConnell’s plan is to avoid accountability, by making the President appear to be the only one responsible for debt ceiling increases, when, for all practical purposes, Congress forces the President to increase the debt ceiling.  Such avoidance of accountability is not unconstitutional, per se, but certainly raises doubts as to its desirability.

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The WSJ is reporting that ethanol subsidies may end by August.  If so, that is fantastic news.

Sen. Dianne Feinstein (D, Calif.) said in a statement that she had reached an agreement with Sens. Amy Klobuchar (D, Minn.) and John Thune (R, S.D.) under which a 45-cent-a-gallon tax credit for blending ethanol into gasoline would expire on July 31. A 54-cent-a-gallon tax on imported ethanol would also expire at the end of the month.

Some $1.33 billion in savings would be used to reduce the $14.29 trillion U.S. debt. A third of the savings—an estimated $668 million—would be used to extend tax credits, such as those for alternative-fueling infrastructure like ethanol pipelines that some producers hope to build.

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Shortly after my last post, the Senate re-voted on whether to eliminate ethanol subsidies, and this time, the measure passed, 73-27.  Apparently many Democrats who voted against the earlier measure on alleged procedural grounds voted for it in this instance.  Though perhaps they voted for it because it was attached to the Economic Development and Revitalization Act, which the Washington Post posits is unlikely to obtain final senate approval.

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On June 14, 2011, the Senate voted on a bill to repeal $6 billion in annual ethanol tax subsidies.  These ethanol subsidies are wasteful and unhelpful to Americans, as I have discussed in prior posts.  For example, ethanol production requires a large amount of land area, some evidence suggests that ethanol costs more energy to create than it yields, using corn for fuel increases the price of food, ethanol adversely impacts fuel economy and damages older vehicles, and even damages newer vehicles when in high enough concentration (see the prior three links for more information).

Despite the fact that politicians almost uniformly agree that the nation has a debt problem, and thus needs to either decrease spending, increase taxes, or both, the measure failed, because there were not enough votes to overcome a filibuster.

There are two sources of blame for this.  First are the Democrats, who overwhelmingly voted against the bill.  Supposedly one of the major reasons was because Harry Reid whipped against the bill due to alleged procedural problems.  Though I think the more likely answer is so that Democrats can attempt to grandstand about creating or preserving jobs, no matter how worthless the jobs are.  (For example, President Obama recently remarked on the Today Show, that “there were ‘structural issues with the economy. . . . You see it when you go to a bank you use the ATM, you don’t go to a bank teller.'”)  It’s true that subsidizing ethanol will preserve jobs in the ethanol industry.  Though of course if those jobs are worthless, then the government might as well be paying people to dig holes and then fill them up again.  It is inexcusable that Democrats would overwhelmingly continue to support ethanol subsidies when the evidence simply shows that they do more harm than good.

But the more surprising source of blame are a select group of Republicans, led by Grover Norquist (not a senator), the founder of the Americans for Tax Reform.  The ATR members have signed a pledge that they refuse to raise taxes for any reason except for economic growth.  Norquist ordered the members of the ATR to withhold support for the anti-ethanol bill because eliminating the ethanol subsidy, to Norquist, would be tantamount to raising taxes.

I disagree with the rationale for Norquist’s order on two grounds.  First, tax subsidies are spending just as much as they are tax increases.  If the government agrees to give me $10 at tax time (spending) or agrees to give me a $10 decrease in tax liability at tax time (subsidy), the net effect is the same: the government transfers $10 of wealth to me.  Likewise, the tax subsidies that the ethanol industry receives are a transfer of wealth from the government to private businesses.  Whether they are characterized as a tax increase or spending cut is immaterial.  The key question we should be asking is whether the costs of this tax subsidy exceed the benefits.

That leads me to the next objection I have to Norquist’s order, specifically, that Norquist unequivocally refuses to consider the merits of legislation that “raises taxes,” simply because he believes that it “raises taxes.”  Norquist refuses to consider the costs and benefits of what he thinks are a tax increase, even if they benefits would vastly exceed the costs.  This of course will impede bargaining with any politician who believes that solving the federal debt problem requires a combination of spending reduction and tax increases.  And this problem is exacerbated by the fact that Norquist’s definition of “raise taxes,” is much far too broad.

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