Kevin Drum - July 2014

Will Republicans Finally Find a Tax Cut They Hate?

| Tue Jul. 22, 2014 8:38 PM EDT

Charles Gaba makes an interesting point about today's Halbig decision: if upheld, it would amount to a tax increase. Everyone who buys insurance through a federal exchange would lose the tax credits they're currently entitled to, and losing tax credits is the same as a tax increase. This in turn means that if Democrats introduce a bill to fix the language in Obamacare to keep the tax credits in place, it will basically be a tax cut.

This leaves Republicans in a tough spot, doesn't it? Taken as a whole, Obamacare represents a tax increase, which makes it easy for Republicans to oppose it. But if the Halbig challenge is upheld, all the major Obamacare taxes are unaffected. They stay in force no matter what. The only thing that's affected is the tax credits. Thus, an amendment to reinstate the credits is a net tax cut by the rules that Grover Norquist laid out long ago. And no Republican is allowed to vote against a net tax cut.

I'm curious what Norquist has to say about this. Not because I think he'd agree that Republicans have to vote to restore the tax credits. He wouldn't. He's a smart guy, and he'd invent some kind of loophole for everyone to shimmy through. Mainly, I just want to know what loophole he'd come up with. I'm always impressed with the kind of sophistries guys like him are able to spin. It's usually very educational.

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Seven Hours of Sleep Is Just About Optimal

| Tue Jul. 22, 2014 7:11 PM EDT

How much sleep does a normal, healthy adult need? The Wall Street Journal reports:

Several sleep studies have found that seven hours is the optimal amount of sleep—not eight, as was long believed—when it comes to certain cognitive and health markers, although many doctors question that conclusion.

Other recent research has shown that skimping on a full night's sleep, even by 20 minutes, impairs performance and memory the next day. And getting too much sleep—not just too little of it—is associated with health problems including diabetes, obesity and cardiovascular disease and with higher rates of death, studies show.

That's sort of interesting. In the past, I would have had no idea how to guess at this. I always slept exactly the same every night, so I always felt about the same every morning. Over the past couple of years, however, my sleeping habits have become far more erratic, spanning anywhere from six to eight hours fairly randomly. And sure enough, I've vaguely come to the conclusion that six hours makes me feel tired throughout the day, and so does eight hours. Seven hours really does seem to be pretty close to the sweet spot.

Unfortunately, I don't seem to have much control over this. I wake up whenever I wake up, and that's that. Today I got up at 6, tried to get back to sleep, and finally gave up. There was nothing to be done about it. And right about now I'm paying the price for that.

What Happens If Obama Loses the Halbig Case?

| Tue Jul. 22, 2014 1:54 PM EDT

So let's suppose the Halbig case goes up to the Supreme Court and they rule for the plaintiffs: in a stroke, everyone enrolled in Obamacare through a federal exchange is no longer eligible for subsidies. What happens then? Is Obamacare doomed?

Not at all. What happens is that people in blue states like California and New York, which operate their own exchanges, continue getting their federal subsidies. People in red states, which punted the job to the feds, will suddenly have their subsidies yanked away. Half the country will have access to a generous entitlement and the other half won't.

How many people will this affect? The earliest we'll get a Supreme Court ruling on this is mid-2015, and mid-2016 is more likely. At a guess, maybe 12 million people will have exchange coverage by 2015 and about 20 million by 2016. Let's split the difference and call it 15 million. About 80 percent of them qualify for subsidies, which brings the number to about 12 million. Roughly half of them are in states that would be affected by Halbig.

So that means about 6 million people who are currently getting subsidies would suddenly have them yanked away. It's even possible they'd have to pay back any tax credits they'd received previously.

So what's the political reaction? The key point here is that people respond much more strongly to losing things than they do to not getting them in the first place. For example, there are lots of poor people in red states who currently aren't receiving Medicaid benefits thanks to their states' refusal to participate in Obamacare's Medicaid expansion. This hasn't caused a revolt because nothing was taken away. They just never got Medicaid in the first place.

The subsidies would be a different story. You'd have roughly 6 million people who would suddenly lose a benefit that they've come to value highly. This would cause a huge backlash. It's hard to say if this would be enough to move Congress to action, but I think this is nonetheless the basic lay of the land. Obamacare wouldn't be destroyed, it would merely be taken away from a lot of people who are currently benefiting from it. They'd fight to get it back, and that changes the political calculus.

The (Possibly) Frightening Implications of the Halbig Case

| Tue Jul. 22, 2014 12:07 PM EDT

In the Halbig case that struck down subsidies on federal Obamacare exchanges earlier today, one of the key issues was deference to agency interpretation of the law. Longstanding precedent holds that courts should generally defer to agency interpretations as long as they're plausible. They don't have to be perfect. They don't even have to be the best possible interpretations. They merely have to make sense.

The DC circuit court decided that there really wasn't any serious ambiguity in the law, and therefore no deference was due to the IRS's interpretation that state and federal exchanges were meant to be treated the same. The dissent was scathing about this, since the record pretty clearly showed tons of ambiguity. So if and when this case makes it up to the Supreme Court, what's going to happen? A lawyer buddy of mine is pessimistic:

Sadly, I think the Supreme Court will eagerly uphold the challenge because it gets to an issue that conservatives have generally despised: deference to administrative agencies' interpretation of statutes.

It's long been a fundamental principle in administrative law that an agency's interpretation of a federal statute that they are charged with enforcing is entitled to judicial deference, unless such deference is unreasonable. Conservatives would prefer that courts not defer to the government because #biggovernment. Thus, they want to weaken the deference standard and Halbig gives them basically a two-fer. Or a three-fer since the agency interpreting the statute is the IRS: Take out Obamacare, knock back the deference standard, and punch the IRS. This invariably will help advance the conservatives' legal goals because with a lower deference standard, their eccentric theories (such as on tax issues) have a better chance of surviving.

In normal times, the deference standard would likely be left intact because weakening it raises serious issues with government enforcement across all agencies, and courts are loath to send the country into a tailspin. But those days are apparently long past. Truly frightening times.

So what's next? In breaking news, the Fourth Circuit court has just upheld the federal subsidies in Obamacare, ruling squarely on deference grounds—and disagreeing completely with the DC circuit opinion, which held that the legislative language in Obamacare was clear and plain. In fact, said the Fourth Circuit, the statute is ambiguous, and therefore the court owes deference to the IRS interpretation. This is good news for Obamacare, especially if today's DC circuit decision by a three-judge panel is overturned by the full court, thus giving the government two appellate court wins. If that happens, it's even possible that the Supreme Court would decline to hear an appeal and simply leave the lower court opinions in place.

But I'd say an eventual Supreme Court date still seems likely. There's no telling if my friend's read of the politico-legal climate among the Supreme Court's conservative majority is correct, but I thought it was worth sharing.

Europe Agrees to Levy Moderate New Sanctions Against Russia

| Tue Jul. 22, 2014 11:38 AM EDT

Europe has agreed to further sanctions against Russia in response to the shootdown of MH17:

The EU will widen its sanctions against Russia to include more individuals and consider targeting the defence sector, the Dutch foreign minister says. Frans Timmermans said "unanimous" and "forceful" decisions had been taken on enhanced sanctions against Russia over the Ukraine conflict.

....A new sanctions list naming individuals and organisations will be drawn up by EU ambassadors by Thursday, Mr Timmermans told reporters after meeting his EU colleagues in Brussels. He said there was also agreement that the European Commission would look at further measures to be taken against Russia in the fields of defence, concerning "dual-use goods in the field of energy", and in financial services.

The Telegraph reports that not everyone is impressed:

[The sanctions] are not likely to satisfy not the United States and more hawkish members of the EU, including Poland and the Baltic states, who lobbied for tough sanctions against the Russian economy. In their conclusions, the ministers said they would only ask the 28-nation bloc's executive arm to prepare for more forceful economic sanctions — including targeting the arms, energy and financial sectors.

No surprises here. Most European leaders are willing to do more, but not too much more. They simply have too much invested in their economic ties with Russia to take more drastic steps.

DC Circuit Court Kills Federal Subsidies for Obamacare. Next Stop Is Probably the Supreme Court.

| Tue Jul. 22, 2014 10:35 AM EDT

Well, the DC circuit court has ruled 2-1 that Obamacare subsidies apply only to exchanges set up by states, not to exchanges set up by the federal government. This is because one section of the law says that taxpayers can receive tax credits only if they enroll in a plan "through an Exchange established by the State under section 1311 of the [ACA]." The court ruled that a state is a state, and as far as that goes, it's reasonable enough. Even if this was merely a drafting error, it's pretty clear that the federal government isn't a state.

The problem is that there's more to it than that. The court is also required to ensure that its interpretation of a single clause doesn't make a hash out of the entire statutory construction of a law. The majority opinion makes heavy weather of this for a simple reason: virtually everything in the language of the law assumes that subsidies are available to everyone. Why, for example, would federal exchanges have to report detailed subsidy information if no one even gets subsidies on federal exchanges in the first place? The court blithely waves this off, suggesting that it's merely to allow the IRS to enforce the individual mandate. But that's pretty strained. Enforcing the mandate requires only a single piece of information: whether a taxpayer is insured. It doesn't require detailed information about eligibility for subsidies and the amount of the subsidies each taxpayer gets. The fact that all these details are required certainly suggests that Congress assumed everyone was getting subsidies.

The court, following the arguments of the plaintiffs, also makes a brave effort to figure out why Congress might have done something so transparently ridiculous as limiting subsidies to state exchanges. Their conclusion is that Congress deliberately withheld subsidies from federal exchanges as an incentive for states to set up exchanges of their own. On this point, Judge Harry Edwards was scathing in his dissent:

Perhaps because they appreciate that no legitimate method of statutory interpretation ascribes to Congress the aim of tearing down the very thing it attempted to construct, Appellants in this litigation have invented a narrative to explain why Congress would want health insurance markets to fail in States that did not elect to create their own Exchanges. Congress, they assert, made the subsidies conditional in order to incentivize the States to create their own exchanges. This argument is disingenuous, and it is wrong. Not only is there no evidence that anyone in Congress thought § 36B operated as a condition, there is also no evidence that any State thought of it as such. And no wonder: The statutory provision presumes the existence of subsidies and was drafted to establish a formula for the payment of tax credits, not to impose a significant and substantial condition on the States.

It makes little sense to think that Congress would have imposed so substantial a condition in such an oblique and circuitous manner....The simple truth is that Appellants’ incentive story is a fiction, a post hoc narrative concocted to provide a colorable explanation for the otherwise risible notion that Congress would have wanted insurance markets to collapse in States that elected not to create their own Exchanges.

There's no evidence that Congress ever thought it needed to provide incentives for states to set up their own exchanges. Certainly they could have made that clear if that had been their intention. As Edwards says, this claim is simply made up of whole cloth. In fact, he says acerbically, the entire suit is little more than a "not-so-veiled attempt to gut the Patient Protection and Affordable Care Act ":

The majority opinion evinces a painstaking effort — covering many pages — attempting to show that there is no ambiguity in the ACA. The result, I think, is to prove just the opposite. Implausible results would follow if “established by the State” is construed to exclude Exchanges established by HHS on behalf of a State. This is why the majority opinion strains fruitlessly to show plain meaning when there is none to be found.

....This court owes deference to the agencies’ interpretations of the ACA. Unfortunately, by imposing the Appellants’ myopic construction on the administering agencies without any regard for the overall statutory scheme, the majority opinion effectively ignores the basic tenets of statutory construction, as well as the principles of Chevron deference. Because the proposed judgment of the majority defies the will of Congress and the permissible interpretations of the agencies to whom Congress has delegated the authority to interpret and enforce the terms of the ACA, I dissent.

Will the Supreme Court agree? Given the obviously political motivations of most Supreme Court justices these days, I think that's hard to predict. A lot will depend on John Roberts. Having already betrayed his fellow conservatives by voting to uphold Obamacare, will he side with the government in order to show that he meant what he said and doesn't want to invite an endless series of desperate attempts to kill the law? Or has he had second thoughts, and will therefore welcome this as a chance to essentially reverse himself? I can't read his mind, so I don't know. We'll find out soon enough.

POSTSCRIPT: This ruling will, I assume, be stayed during appeal, so it has no immediate impact. The next step is for the Obama administration to either ask for an emergency en banc review from the entire DC circuit court, or to appeal directly to the Supreme Court. Either way, it will end up at the Supreme Court sooner or later.

POSTSCRIPT 2: White House press secretary Josh Earnest has confirmed that the administration will ask for an en banc review. Since the full court now has a liberal majority, they presumably hope they'll get a more favorable ruling before heading to the Supreme Court.

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For Republicans, It's All Going According to Plan

| Tue Jul. 22, 2014 9:07 AM EDT

Steve Benen draws a contrast today between an activist president who's at least trying to get things done, and a dysfunctional Congress than can't even make the attempt:

Remember the VA crisis? Lawmakers quickly approved a reform bill, which now appears likely to fail because of House Republicans’ reluctance to compromise. Remember the plan to address the border crisis? The plan was for Congress to act before taking August off, but that now appears unlikely, too.

The effort to extend unemployment benefits is dead. So is raising the minimum wage. So is ENDA. No one even talks about gun background checks anymore. The Highway Trust Fund will probably benefit from a stopgap measure, but even this hardly represents real governing.

Unfortunately, I think Republicans would call this a big win. Getting things done doesn't really do them any good at the ballot box. Making the government appear impotent and incompetent does. So that's the path they've chosen.

Obama Planning to Retire to Rancho Mirage?

| Mon Jul. 21, 2014 8:01 PM EDT

Let the speculation begin!

President Obama and his wife, Michelle, could be the owners of a home in Rancho Mirage listed at $4.25 million before the month is out. The First Family is believed to be in escrow on a contemporary home in a gated community where entertainers Frank Sinatra, Bob Hope and Bing Crosby once maintained estates.

The White House said rumors regarding a home in Rancho Mirage are not true.

....The 8,232-square-foot compound in question sits adjacent to a bighorn sheep preserve on a 3.29-acre hilltop with panoramic views. The custom-built main house, constructed in 1993 and designed for entertaining, includes a gym, four bedrooms and 4.5 bathrooms. A 2,000-square-foot casita has three bedrooms and three bathrooms. Over-the-top exterior features include a pool with a 20-foot waterfall, a rock lagoon, two spas, a misting system and a putting green with a sand trap.

I have to say that the Obamas don't really strike me as Rancho Mirage kind of people, but who knows? Maybe I've misjudged them.

Photo by Clark Dugger Photography

Wage Stagnation Is No Illusion

| Mon Jul. 21, 2014 6:00 PM EDT

Bloomberg has a long article today wondering whether wage stagnation is mainly due to demographic shifts:

25- to 34-year-olds will make up 22.5 percent of the workforce by 2022, compared with 21.6 percent in 2012....Meanwhile, the share of 45- to 54-year-olds in their best earning years will drop by 3.3 percentage points in the decade ending 2022.

....Hollowing out the middle-aged working population could cut median earnings because such employees bring home the biggest paychecks. The median 45- to 54-year-old household earns $66,400 a year, compared with $51,400 for 25- to 34-year-old households.

Well, sure. Compared to 30 years ago, the theory goes, we have more young workers bringing down the average and fewer prime age workers raising the average. As a result, the average is declining. But all that means is that baby boomers are aging out of the workforce, not that wages are necessarily in bad shape.

That makes sense. At least, it would make sense if it were true. The thing is, in an article more than a thousand words long, we never learn that we can look at this directly. The chart on the right shows the median wages of just 25-34 year olds, and as you can see, they've been declining for more than a decade. This has nothing to do with demographics because it's measuring wages for the same age group the entire time.

Now, these figures don't include health insurance, and they only go through 2012. So they aren't of much help if, say, the Fed is trying to gauge the tightness of the labor market in the second quarter of 2014. Nonetheless, they certainly show a long-term trend of wage stagnation that plainly has nothing to do with demographics. This makes it vanishingly unlikely that wage stagnation over the past six months is merely due to demographic shifts.

It's a nice fairy tale to pretend that wage stagnation might just be an artifact of boomers retiring, but easily available data quite clearly shows otherwise. It's real.

Do We Need More Business Folks In Congress?

| Mon Jul. 21, 2014 3:08 PM EDT

Ed Kilgore points to a new Gallup poll that asks what kind of people you'd like to see in Congress:

So is this a vote for more business experience? Or even—shudder—a retroactive yearning for Mitt Romney? Like Kilgore, I'm skeptical. At a guess, people who answered the question about business experience were implicitly contrasting it with lawyers or career politicians, and that's a rigged deck. Of course business leaders will come out ahead compared to those two despised professions.

Which makes it too bad that Gallup screwed up this question. Instead of throwing out a kitchen sink of qualities (occupation, religion, ideology, etc.) they should have asked specifically about a list of occupations. Do you think the country would be better governed if our legislatures had more:

  • Business folks
  • Teachers
  • Lawyers
  • Doctors
  • Retired people
  • Military leaders
  • Scientists
  • Etc.

That would be kind of an interesting poll. Personally, I'd vote for more kindergarten teachers. I suspect that's a pretty appropriate background for serving a few years in Congress.