Barron’s editorial page editor explains why the law, as written, doesn’t tell the whole story

Thomas Donlan of Barron’s places former U.S. House Speaker Nancy Pelosi’s infamous Obamacare quip (“we have to pass the bill so that you can find out what is in it”) in context.

It seems Pelosi meant that Americans would not fully understand how the bill would work until they could see it improving Americans’ health. By that grandmotherly standard, we still don’t know what’s in the bill. If free preventive care really improves the general level of health, it will take a few more years for the evidence to accumulate.

Right now, however, Pelosi’s remark is still more relevant to political science than to medical science. Intentionally or not, it was a fair statement of a principle in 21st century governance: What the Congress enacts is only the beginning of the legislative process.

Whatever the civics textbooks may say, a bill does not really become law until the rules and regulations implementing it are written by administrative agencies, formally proposed in the Federal Register, commented upon by interested groups and their lobbyists, revised, finally adopted, and — what is now the most important stage of lawmaking — litigated.

The process is so long and convoluted that the part played by Congress is diminished in importance. We really can’t know what a bill will mean until long after passage, when the courts tell us what the regulations mean.

The Affordable Care Act, which should be known as Pelosicare after its legislative shepherd but has been dubbed Obamacare, was signed on March 23, 2010. The rules have been under construction ever since. The legal battles over the rules and their meaning began almost as quickly, and won’t end for years.

It took until June 2012 for the fundamental case about the constitutionality of the individual mandate to be decided by the U.S. Supreme Court. That was the case in which Chief Justice John Roberts saved the law by transforming a penalty into a tax, and that judicial rewrite set the stage for many rewrites still to come. All of the rewrites are coming from the executive branch and the judicial branch, since the election of 2010 threw Congress into deadlock about Obamacare and almost everything else.

Barron’s ‘Economic Beat’ columnist tries his hand at the Krugman takedown game

Is there any new ground to be broken in tearing Paul Krugman‘s arguments apart? Gene Epstein tries in his latest “Economic Beat” column for Barron’s.

Last week, I reported that the Congressional Budget Office’s recently released “2014 Long-Term Budget Outlook” warned “the fiscal ship of state is in danger of hitting an iceberg” (“New Warning on U.S.’s Gathering Debt Storm,” July 21). Readers asked me how New York Times columnist Paul Krugman could cite the same study and conclude that the agency’s projections are “distinctly non-alarming” (“The Fiscal Fizzle,” the New York Times, July 20).

The key difference is that Krugman reported only one of the estimates from the CBO for the possible trajectory of the debt-to-gross-domestic-product ratio between now and the late-2030s. He cited only the agency’s “extended baseline” scenario, which put the ratio above 100% by the late 2030s from the current 74%. He did not mention that the CBO study also presented its “extended alternative fiscal scenario,” which projected that by the late-2030s, the debt-to-GDP ratio would climb above 180%.

EVEN THE BASELINE SCENARIO, which assumes that “current laws governing taxes and spending will remain generally unchanged,” can hardly be characterized as “distinctly non-alarming.” It shows, for example, that if current laws aren’t changed, the debt-to-GDP ratio will continue to climb, from 106% in 2039, to 126% by 2050, to 147% by 2060. By neglecting to mention this, Krugman manages to dismiss the scary number by pointing out that by 2039, the debt would be “no higher, as a percentage of GDP, than the debt America had at the end of World War II.”

The CBO itself makes this comparison, but then points out that, unlike at the end of World War II, the debt would still be on an “upward path,” a “trajectory [that] ultimately would be unsustainable.”

But as mentioned, Krugman’s main omission in his column was to leave out the far scarier extended alternative fiscal scenario, which puts the debt-to-GDP ratio at more than 180% by 2039. The omission gives readers the impression that the baseline was the CBO’s only projected figure.

As I pointed out in my write-up, the extended alternative is more realistic than the baseline scenario. The CBO is obligated to release baseline projections, but the problem with assuming that current laws will remain unchanged is that it’s not the way the budget process works in the real world of Washington, where laws are altered routinely. …

… IN A FOLLOW-UP BLOG POST, Krugman responded to readers by acknowledging a Wall Street Journal op-ed that presents the extended-alternative scenario. He made a brief, dismissive reference to the numbers (pointing out, irrelevantly, that “well over half of the projected spending…has nothing to do with entitlements”), and ironically faulted the writer of the op-ed for omitting to mention that he is not reporting the baseline numbers.

But there is no coverup; the op-ed makes the distinction clear. It was Krugman who engaged in a glaring omission by reporting the CBO results while ignoring the extended-alternative projections.

A notorious Nixon aide sees the comparison between the 37th and 44th presidents

The latest installment of TIME magazine’s “10 Questions” features former Nixon aide John Dean. Read the whole piece, and you’ll note that Dean appears to have little good to say about either his former boss or the Bush administration.

But one excerpt in particular attracted this observer’s attention.

Does the case of Edward Snowden and NSA surveillance show that post-Watergate limits on the presidency are working or that they’re not working?

I find interesting the comparison between Snowden and Daniel Ellsberg, [whose Pentagon Papers leak] provoked so much of Nixon’s anger and effort to deal with leaks. The Obama Administration has been much more aggressive than [Nixon's] in dealing with leaks.

Nixon personally authorized the Brookings Institution burglaries and other crimes in response to Ellsberg’s leak.

Nixon only prosecuted one leaker … What Obama has done more aggressively than Nixon and more aggressively than Bush even is prosecute journalists and leakers … I’m sure Nixon is smiling.

The Nixon-Obama comparison should surprise no one who visits this forum regularly.

Socialism: Bad economically and bad morally

Three Duke researchers (Dan Ariely, Ximena Garcia-Rada, and Heather Mann) and a University of Munich colleague have an interesting new research finding, summarized here:

By running an experiment among Germans collecting their passports or ID cards in the citizen centers of Berlin, we find that individuals with an East German family background cheat significantly more on an abstract task than those with a West German family background. The longer individuals were exposed to socialism, the more likely they were to cheat on our task. While it was recently argued that markets decay morals (Falk and Szech, 2013), we provide evidence that other political and economic regimes such as socialism might have an even more detrimental effect on individuals’ behavior.

Zenon Evans reports on the new research findings for Reason‘s blog.

The results were that “East Germans cheated twice as much as West Germans overall,” leaving the researchers to conclude the “the political regime of socialism has a lasting impact on citizens’ basic morality.”

The paper discusses some potentially related reasons for the outcome, such as the fact that

socialist systems have been characterized by extensive scarcity, which ultimately led to the collapse of the German Democratic Republic (GDR) in East Germany. In many instances, socialism pressured or forced people to work around official laws. For instance, in East Germany stealing a load of building materials in order to trade it for a television set might have been the only way for a driver of gravel loads to connect to the outside world. Moreover, socialist systems have been characterized by a high degree of infiltration by the intelligence apparatus.

The Duke-Munich team positions their work against a 2013 study, “Of Morals, Markets and Mice,” which concluded “that market economies decay morals” but “compared decisions in bilateral and multilateral market settings to individual decisions rather than an alternative economic allocation mechanism.” The new research finds that “political and economic regimes such as socialism might have an even more detrimental effect on individuals’ behavior.”

In another aspect of the study, the researchers note that “we did not observe an overall difference between East and West Germans in pro-social behavior,” such as donating to hospitals, the capitalist-influenced demographic does, in fact, donate marginally more.

Contrast these findings to those stressing the morality of capitalism.

Who’s going to end up paying the ‘Cadillac tax’?

Alex Adrianson asks that question in an entry for the Heritage Foundation’s “Insider Online” blog.

The so-called “Cadillac tax,” a tax on high-cost health insurance, is supposed to discourage the kind of overly generous first-dollar coverage that encourages too much health care consumption. That tax was deferred until 2018, but Roger Stark reports that private employers are already offering fewer plans that would be subject to the tax:

The non-partisan Congressional Budget Office (CBO) originally estimated the Cadillac Tax would generate $137 billion in new revenue over 10 years. Last year the CBO re-calculated the revenue at $80 billion, because private employers were already shifting to less generous health insurance plans.

But one kind of employer is an exception to the trend: The government itself:

United Benefit Advisors (UBA) surveyed 11,000 employers last year. The report found that government-employer annual health care costs increased at double the rate of health coverage in the private sector. The survey also showed that private-sector employees have larger co-pays and higher out-of-pocket expenses than public workers. Since the recession of 2008, wage freezes have been common for all workers, but government employees have been much more likely to receive increased compensation through expanded health benefits, even as public-sector salaries are held flat.

Stark also reports that the large public employee unions are already bargaining for retaining generous health care benefits in their next contracts, which will run past 2018. [Washington Policy Center, July 2014]

In form, the public employee unions bargain with the government, but such negotiations are often an exercise in self-dealing: Politicians vote for generous government worker benefits, and the government workers in turn vote for the politicians. Expect the Cadillac tax to add to state and local tax burdens.

Yes, that means you and your fellow taxpayers could end up paying the Cadillac tax.

New Carolina Journal Online features

Sam Hieb reports for Carolina Journal Online on N.C. counties’ pursuit of sales-tax increases and the impact of pending state legislation.

John Hood’s Daily Journal pokes holes in misguided statements about North Carolina’s jobs picture.

And he called it … a ‘speak-o’

Jonathan “The Architect” Gruber has an explanation for, um, bizarrely and totally accidentally validating the entire premise of Halbig back in 2012 before those awful libertarians happened upon it.

I honestly don’t remember why I said that. I was speaking off-the-cuff. It was just a mistake. People make mistakes. Congress made a mistake drafting the law and I made a mistake talking about it. …

But there was never any intention to literally withhold money, to withhold tax credits, from the states that didn’t take that step. That’s clear in the intent of the law and if you talk to anybody who worked on the law. My subsequent statement was just a speak-o—you know, like a typo.

Gruber is having to admit to being a serial speak-o-ist, given that he is fresh off peddling the initial lie to Chris “Obama is the New Testament” Matthews, that

Chris, it is unambiguous this is a typo. Literally every single person involved in the crafting of this law has said that it’s a typo, that they had no intention of excluding the federal states. And why would they?

And again,

It’s just simply a typo, and it’s really criminal that this has even made it as far as it has.

Who knew the bold declaimer of criminal typos was a perpetrator of multiple criminal speak-os just two years ago?

“Corporations aren’t people with Constitutional rights!” Do you really believe this?

This is a standard claim of progressives and their biggest complaint against not only the recent Hobby Lobby ruling regarding the HHS contraceptive mandate but also the Citizens United decision which ruled that corporations had First Amendment rights with respect to free speech and campaign contributions. In a recent blog post at the Bloomberg View.com Megan McCardle, in the context of the Hobby Lobby decision, gives one of the best responses to this that I have seen. What she demonstrates is that it would be absurd to assume otherwise. Quoting McCardle:

Why does the Supreme Court think corporations are people? Isn’t that obviously ridiculous?

The Supreme Court does not think that corporations are people in the sense that you mean — the Supreme Court will not be ruling that Wendy’s has a Title IX right to play college sports. But we extend corporations many of the rights that people get because otherwise the results would be horrifying: The government would have the right to shut down the presses at the New York Times; search Google’s servers without a warrant whenever they liked; tell churches (usually organized as corporations) what they could believe; deny nonprofits the right to organize protests; and otherwise abridge fundamental human rights.

Of course, the Hobby lobby case was much more limited than this, although I wish it was broader. McCardle goes on to point out that:

In this case, the ruling is that closely held corporations (companies where five or fewer people own more than half the stock) are in some sense an extension of their owners, and therefore enjoy the same rights as sole proprietors and partnerships to exercise their beliefs.