2012 - %3, June

IRS Takes a Closer Look at Rove's Dark-Money Group

| Thu Jun. 28, 2012 12:32 PM PDT

As they dominate the airwaves with political ads, dark-money nonprofits are coming under increased scrutiny. At issue is the charge that they're running afoul of their tax-exempt status by focusing on partisan political activity. Earlier this week, New York Attorney General Eric Schneiderman sent subpoenas to a nonprofit affiliated with the Chamber of Commerce to see if millions of dollars had been improperly funneled to the Chamber (a 501(c)(6) nonprofit) for political purposes.

Now, the Wall Street Journal reports, the Internal Revenue Service has begun a process of determining whether Karl Rove's Crossroads GPS should have to give up its nonprofit 501(c)(4) status and disclose its donors. Democrats and campaign-finance watchdogs have been urging regulators to crack down on groups like Crossroads GPS; last week the Obama campaign's top lawyer sent a snarky letter to Rove saying he was filing a complaint with the FEC "laying out the case—obvious to all—that Crossroads is a political committee subject to federal reporting requirements."

If the IRS revokes Crossroads GPS' or other 501s' nonprofit status, the Journal explains, "the organizations could be held liable for large tax bills for the millions of dollars they have received tax-free." However, reaching such a determination will likely take months. Which means that dark-money groups can keep spending freely on ads and promising anonymity to their donors through the November election.

For more, check out our interactive dark-money universe map, which tracks Crossroads GPS and 17 other 501 groups.

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Dish Network Annoys John Dingell, Prepares to Pay the Price

| Thu Jun. 28, 2012 12:09 PM PDT

The Dish Network, in its continuing effort to attract new viewers, introduced a new DVR called the Hopper earlier this year. The Hopper's main appeal is that it allows you to skip past commercials entirely, and unsurprisingly, TV networks aren't very happy about this. But guess who else is unhappy?

At a Wednesday hearing on video distribution held by the Communications and Technology Subcommittee of the Energy and Commerce Committee, [Rep. John Dingell, D–Clueless] complained that the service will allow potential voters to skip past important commercial messages.

"I've got an election coming up, like all my colleagues," Dingell said, during his questioning of Dish Network Chairman Charlie Ergen. "We all put political ads on the local stations to reach our constituents. The Hopper potentially limits the ability of every member of this subcommittee to reach constituents to help them make up their minds on Election Day.

"Do you understand and appreciate the concerns that the politicians up here on the dais and other politicians everywhere will feel about that, yes or no?" Dingell asked.

Clearly, the Dish Network has gone too far. Skipping past Axe body spray ads is one thing, but skipping past John Dingell's reelection ads? That can't be tolerated.

This is a surprising lapse. The Dish folks should have known that they were violating one of the fundamental rules of American business: you can annoy consumers all you want, but never, never, never annoy congressmen. That's the royal road to ruin.

Congressional GOPers React to Health Care Ruling: Obamacare=Cancer

| Thu Jun. 28, 2012 11:18 AM PDT
Rep. Louie Gohmert (R-Texas) outside the Supreme Court on Thursday morning.

Outside the Supreme Court on Thursday morning, momentary confusion overtook the gigantic crowd of Obama supporters, tea partiers, congressional lawmakers, and hapless tourists. After it was erroneously reported that the court had rejected Obamacare's individual mandate as unconstitutional, cheers went up from the side of the crowd where most of the tea partiers had gathered. But as news of the actual ruling trickled through the crowd, the tenor among the conservative activists quickly turned to anger, much of it directed at the high court.

"We are not going away," shouted one activist into a microphone. "Liberty and freedom will survive…We'll stay here until they get it right."

Another took the mic a few minutes later. "You might as well come get me, 'cause I ain't payin' it," she said. References to socialism, the Soviets, and communism abounded, along with chants of "Repeal it now."

Soon, a different response to the decision had taken shape. In their majority opinion, the justices had concluded that the individual mandate in the health care law is constitutional because it constitutes a tax. Conservatives in the crowd (and on the airwaves) quickly seized on the ruling as proof that President Obama and other supporters of the law lied when they claimed the healthcare law wasn't a tax in order to pass the legislation. "The Congress lied to the American people. The president of the United States lied to the American people," said Rob Schenck of the National Clergy Council.

"Obamacare is a malignant tumor that feeds on America," said Rep. Jeff Landry, (R-La.).

"Everyone who believes the president and those who work for him are fools," said Rep. Louie Gohmert (R-Tex.), who spoke to the crowd outside the Supreme Court after the ruling. "If America doesn't wake up and replace all of them who lied to us," he continued, "shame on us." 

Cancer rhetoric was also popular, the irony of which seemed to be lost on those employing it. "Obamacare is a malignant tumor that feeds on America," said Rep. Jeff Landry, (R-La.). 

"Today America is threatened with a stage-three cancer of socialism, and Obamacare is the first symptom," said Rep. Todd Akin (R-Mo.), who is running for the Senate this year against Democrat Claire McCaskill.

Tea party champion Rep. Michele Bachmann (R-Minn.) gave perhaps the longest speech, declaring that the law was "unconstitutional" and noting that "clearly this is an activist court." (Nevermind that Chief Justice John Roberts, a conservative, voted with the liberal justices and authored the majority opinion.) "America will never be the same because of socialized medicine," said Bachmann. "The government today is capable of forcing Americans to buy anything."

Others took a slightly different tack. "They may say this law is constitutional," said Rep. Phil Gingrey (R-Ga.), "but it's un-American."

Amidst all the unhappy tea partiers and congressional Republicans, I spotted a lone Democratic lawmaker—New York Rep. Jerrold Nadler. Nadler, who had previously fretted about how the "radical and unpredictable" justices might come down, was clearly pleased about the decision. I asked what he thought of the line of attack about the law constituting a tax that seemed to be developing. "So it's a tax. So what?" he said. "I thought the administration should have said that right out."

GOP Votes for Contempt as "Fast and Furious" Blows Up in Its Face

| Thu Jun. 28, 2012 11:08 AM PDT

How are tons of US guns getting to Mexico? Ask conservatives Flickr/Brian.chHow are tons of US guns getting to Mexico? Ask conservatives. Flickr/Brian.chThe "Fast and Furious" imbroglio may have just gone sideways on House Republicans. Just prior to them leading a House vote for contempt against Attorney General Eric Holder on Thursday, a far-reaching investigation published by Fortune magazine poked major holes in the conservative storyline about the alleged gun operation. Claims that law enforcement engaged in a deadly plot to let Mexican outlaws smuggle US guns, the magazine reports, are based on allegations by a lone whistleblower who may in fact be the only person who did any illegal gun-smuggling. The real cause of violence and crime south of the border, it reports, is lax gun laws in Arizona and elsewhere pushed by Republicans and their friends at the National Rifle Association.

To review the allegations in brief: Agents from the Bureau of Alcohol, Tobacco, Firearms, and Explosives (ATF) supposedly recruited local sellers in Arizona to hawk guns to known smugglers, then monitored the flow of those guns to criminal gangs in Mexico in the hopes of catching "big fish," in a tactic known as "gun-walking" (as opposed to "gun-running"). Two of these ATF-monitored assault weapons ended up at the crime scene where Brian Terry, a US Border Patrol agent, was shot and killed in December 2010. An ATF agent with a crisis of conscience blew the whistle on the operation, dubbed Fast and Furious, and Republicans in Congress began asking questions.

Now, Rep. Darrell Issa (R-Calif.), chairman of the House government oversight committee, suspects the White House of involvement in the affair, and has demanded the administration turn over scores of internal communications. The White House has acknowledged that mistakes were made and turned over more than 7,600 pages of documents related to the case. But Issa demanded another 100,000 pages of internal administration communications, and President Obama invoked executive privilege to keep the documents confidential. Issa responded by pursuing the contempt-of-Congress vote against Holder—the first ever against a sitting attorney general—on the notion that the DOJ screwed up on Holder's watch.

According to Fortune, though, almost everything about the story that Republicans have been flogging is wrong. And the magazine makes the case that the GOP's allegations against Holder and the Obama administration aren't just inaccurate—rather, they distract from the possibility that GOP's politics are actually to blame for the deluge of three-quarters of a million American guns per year into Mexico. "Republicans who support the National Rifle Association and its attempts to weaken gun laws are lambasting ATF agents for not seizing enough weapons—ones that, in this case, prosecutors deemed to be legal," the report states.

"Republican senators are whipping up the country into a psychotic frenzy with these reports that are patently false," Linda Wallace, an IRS agent who worked on the Fast and Furious team and calls herself a "gun-rights supporter," told Fortune. Could Fast and Furious be a new Climategate, the next fact-free conservative conspiracy that takes roost in America's collective unconscious?

The Fortune exposé, which reporter Katherine Eban says took her six months to assemble, is exhaustive and tough to summarize, but its highlights are these:

More Bickering on the Agenda Today in Brussels

| Thu Jun. 28, 2012 10:19 AM PDT

You may be surprised to learn that the rest of the world still exists today, but it does! In particular, EU leaders are meeting today to decide if they plan on doing anything to prevent the eurozone from melting down, or if they're just going to twiddle their thumbs a bit longer. Unfortunately, reading the tea leaves is even harder than usual right now. For example, here is German Finance Minister Wolfgang Schäuble on the possibility of pooling European debt in order to shore up Spain and Italy:

Berlin Blinks on Shared Debt

Germany may be willing to move sooner than expected to accept shared liability of euro-zone debt and would support short-term measures to deal with the acute financing problems facing some of the region's governments....Mr. Schäuble said Germany could agree to some form of debt mutualization as soon as Berlin is convinced that the path toward establishing centralized European controls over national fiscal policy is irreversible. That could happen before full implementation of treaty changes.

That sounds promising. But here's his boss, chancellor Angela Merkel:

Germany rules out pooling of eurozone debt

Germany has flatly ruled out any pooling of eurozone debt in response to the single currency crisis, seeming to set the scene for clashes at an EU summit that looks unlikely to take any big decisions to quickly stabilise the euro.....[Merkel] made it clear she would not yield to pressure to move towards the common issuance of eurozone debt in the form of eurobonds, to lower the cost of borrowing for vulnerable countries such as Spain and Italy.

Merkel's tough stance appeared to open up the prospects of a clash with Mario Monti, the Italian prime minister, who is trying to restructure Italy's creaking economy but is impotent in the face of the financial markets raising the price he pays to borrow. Italy was forced to offer a yield of 2.96% to sell six-month bills, up from 2.1% a month ago. Its benchmark 10-year yield was up slightly at 6.22% and faces an important test with an auction of €5.5bn (£4.4bn) of five and 10-year bonds.

Not so promising! Overall, I'd say the tea leaves are bending toward more thumb twiddling, but I suspect that this depends a lot more on outside events than on negotiations behind closed doors in Brussels. Germany is going to hold out as long as it can, and that means holding out until catastrophe is truly looming and either Spain or Italy is about to collapse. That could happen tomorrow or it could happen six months from now. So stay tuned.

Obamacare Decision: Romney Won't Like This Passage

| Thu Jun. 28, 2012 10:02 AM PDT
Mitt Romney.

The Supreme Court upheld the Affordable Care Act by a 5 to 4 vote on Thursday. Maybe you heard. (My colleague Adam Serwer has a great analysis of what this actually means.) GOP presidential nominee Mitt Romney, responding to the ruling in front of the US Capitol, reiterated his pledge to spend his hypothetical first day in office working to repeal Obamacare. (House Majority Leader Eric Cantor is already promising another repeal vote in early July.)

But it's safe to say Romney, the only other elected official in American history to mandate that citizens buy health insurance, probably won't like this passage from Justice Ruth Bader Ginsburg's opinion, which partially concurred with Roberts and partially dissented:

By requiring most residents to obtain insurance, see Mass. Gen. Laws, ch. 111M, §2 (West 2011), the Commonwealth ensured that insurers would not be left with only the sick as customers. As a result, federal lawmakers observed, Massachusetts succeeded where other States had failed.  See Brief for Commonwealth of Massachusetts as Amicus Curiae in No. 11–398, p. 3 (not­ing that the Commonwealth’s reforms reduced the number of uninsured residents to less than 2%, the lowest rate in the Nation, and cut the amount of uncompensated care by a third); 42 U. S. C. §18091(2)(D) (2006 ed., Supp. IV) (noting the success of Massachusetts’ reforms). In cou­pling the minimum coverage provision with guaranteed­ issue and community-rating prescriptions, Congress followed Massachusetts' lead.

Ginsburg, of course, is completely correct. And in a sane political climate, Mitt Romney would happily take credit for this. As it stands, he's in the uncomfortable position of once more distancing himself from his biggest political accomplishment.

(h/t Politico's Alex Burns.)

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Corn on Hardball: The Fast and Furious Scandal Is Also...Fictional

Thu Jun. 28, 2012 9:41 AM PDT

A new Fortune investigation reveals that Fast and Furious never happened—US authorities never intentionally let guns fall into the hands of Mexican drug cartels. The real scandal here is the invention of a scandal. David Corn, Mother Jones's Washington bureau chief, talks about how murky gun politics led us all to believe otherwise.

10 Things You Get Now That Obamacare Survived

| Thu Jun. 28, 2012 9:40 AM PDT

The US Supreme Court on Thursday largely upheld the Patient Protection and Affordable Care Act, the centerpiece of President Obama's first term in office. Chief Justice John Roberts, a conservative appointed by George W. Bush, joined with the high court's four liberals and penned the majority opinion. In their dissent, the court's four other conservative justices said they would have struck down the entire law.

So what does the court's ruling mean for regular Americans?

After the ACA's passage in 2010, Mother Jones' Nick Baumann listed 10 ways Obama's signature health care law will impact the healthy and sick, young and old, rich and poor. Here they are:

1) Insurance companies can no longer impose lifetime coverage limits on your insurance. Never again will you face the risk of getting really sick and then, a few months in, having your insurer tell you, "Sorry, you've 'run out' of coverage." Almost everyone I've met knows someone who had insurance but got really, really sick (or had a kid get really sick) and ran into a lifetime cap.

2) If you don't know someone who has run into a lifetime cap, you probably know someone who has run into an annual cap. The use of these will be sharply limited. (They'll be eliminated entirely in 2014.)

3) Insurers can no longer tell kids with preexisting conditions that they'll insure them "except for" the preexisting condition. That's called preexisting condition exclusion, and it's out the window.

4) A special, temporary program will help adults with preexisting conditions get coverage. It expires in 2014, when the health insurance exchanges—basically big "pools" of businesses and individuals—come on-line. That's when all insurers will have to cover everyone, preexisting condition or not.

5) Insurance companies can't drop you when you get sick, either—this plan means the end of "rescissions."

6) You can stay on your parents' insurance until you're 26.

7) Seniors get $250 towards closing the "doughnut hole" in their prescription drug coverage. Currently, prescription drug coverage ends once you've spent $2,700 on drugs and it doesn't kick in again until you've spent nearly $6,200. James Ridgeway wrote about the problems with the doughnut hole for Mother Jones in the September/October 2008 issue. Eventually, the health care reform bill will close the donut hole entirely. The AARP has more on immediate health care benefits for seniors. Next year (i.e., in nine months), 50 percent of the doughnut hole will be covered.

8) Medicare's preventive benefits now come with a free visit with your primary care doctor every year to plan out your prevention services. And there are no more co-pays for preventative services in Medicare.

9) This is a big one: Small businesses get big tax credits—up to 50 percent of premium costs—for offering health insurance to their workers.

10) Insurers with unusually high administrative costs have to offer rebates to their customers, and every insurance company has to reveal how much it spends on overhead.

UPDATE: Here's one more big benefit we've found out about since the ACA passed:

11) Free birth control and other preventative services for women, unless you work for a faith-based organization that opposes birth control.

Hungry for more? Read Adam Serwer's breakdown of what the Supreme Court's decision means and what comes next

How Big a Deal Is the Court's Medicaid Decision?

| Thu Jun. 28, 2012 9:17 AM PDT

Although the Supreme Court upheld the constitutionality of the individual mandate, it partially struck down the expansion of Medicaid under Obamacare. Here is John Roberts' explanation:

Our cases have recognized limits on Congress’s power under the Spending Clause to secure state compliance with federal objectives. "We have repeatedly characterized…Spending Clause legislation as ‘much in the nature of a contract.'" The legitimacy of Congress's exercise of the spending power "thus rests on whether the State voluntarily and knowingly accepts the terms of the 'contract.'"

....Permitting the Federal Government to force the States to implement a federal program would threaten the political accountability key to our federal system....Spending Clause programs do not pose this danger when a State has a legitimate choice whether to accept the federal conditions in exchange for federal funds. In such a situation, state officials can fairly be held politically accountable for choosing to accept or refuse the federal offer. But when the State has no choice, the Federal Government can achieve its objectives without accountability.

....The States [...] object that Congress has “crossed the line distinguishing encouragement from coercion,” in the way it has structured the [Medicaid] funding: Instead of simply refusing to grant the new funds to States that will not accept the new conditions, Congress has also threatened to withhold those States’ existing Medicaid funds. The States claim that this threat serves no purpose other than to force unwilling States to sign up for the dramatic expansion in health care coverage effected by the Act.

Given the nature of the threat and the programs at issue here, we must agree…In this case, the financial "inducement" Congress has chosen is much more than "relatively mild encouragement"—it is a gun to the head…A State that opts out of the Affordable Care Act’s expansion in health care coverage thus stands to lose not merely “a relatively small percentage” of its existing Medicaid funding, but all of it.

I actually find this partially compelling. Threatening to withhold all Medicaid funding if a state doesn't participate in the new program is, as Roberts says, pretty close to being "a gun to the head." But if you look at the actual funding levels enacted in the law, it's more of a popgun than an AK-47. The feds will finance 100 percent of the Medicaid expansion through 2016, 93 to 95 percent through 2020, and 90 percent beyond 2020. So yes, the level of coercion is high, but the level of funding demanded of the states is very low. There's both a carrot and a stick here.

Still, the court has ruled, and that's that. Congress can set conditions for federal funding, but those conditions can't include the loss of existing funds if a state chooses not to participate in a new program. It's not immediately clear how big an impact this will have going forward, since Congress still has some big sticks to persuade states to participate in federal programs, but it definitely blunts Congress's power at least a little bit.

In practice, what's likely to happen here is pretty sad: Southern states, the very ones whose residents would gain the most from the new Medicaid provisions, are the most likely to opt out. The question is, how long will this last? Here, I'll go out on a limb and suggest that they won't hold out very long. There are a few reasons for this:

  • Federal funding is 100 percent for the first three years. That's going to be hard to resist.
  • That 100 percent funding runs through 2016. Right now emotions are running high, but if Obama is reelected and it becomes obvious that Obamacare is here to stay, things will probably cool down. By 2014 or 2015, as the specter of jackbooted federal tyranny recedes, wiser heads may prevail.
  • There's going to be a lot of pressure from various interest groups to accept the funding. That includes pressure from within government agencies as well as from outside groups. After all, state and local governments are already on the hook for indigent healthcare, and that includes caring for those who fall in between the current Medicaid cutoff and ACA's new one (roughly speaking, those who are between 50% and 133% of the poverty line). Even the stingy states may discover that they're already spending enough money on that group that they'd be better off simply enrolling them all in Medicaid and paying their small share of the new benefits instead.

So we'll see what happens. For now, I wouldn't pay too much attention to whatever crowd-pleasing bluster we start hearing from (primarily) Southern governors. It's election season, after all. Instead, wait until next year. If Romney wins, it's probably moot. If Obama wins, expect opposition to the new rules to cool down over time. By the time Obamacare kicks in in 2014, the blusterers may be having second thoughts.

We're Still at War: Photo of the Day for June 28, 2012

Thu Jun. 28, 2012 8:30 AM PDT

Paratroopers with 1st Brigade Combat Team, 82nd Airborne Division fire at insurgent forces during a firefight on June 15 in Afghanistan’s Ghazni Province. US Army photo by Sgt. Michael J. MacLeod.