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That Word “Intelligible,” I Do Not Think…

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jfk

“Don’t worry — if this falls through I have a compelling theory that all federal social welfare programs are unconstitutional under the emoluments clause.”

You may remember Richard Epstein from such arguments as “the takings clause makes the vast majority of the U.S. Code unconstitutional because as originally understood it enacted bad 20th century public choice theory.” It’s highly appropriate that he has gotten in on the ACA Troofer racket. He takes the now-dominant approach of a “¯\_(ツ)_/¯” midpoint between the “card says Moops!” and “the Moops invaded Spain” theories, with a bonus appearance from the most important figure in 21st Century American politics:

There is no similar difficulty with the ACA. The government may protest that its subsidies are only available through the state exchanges, but the result is not unintelligible. Indeed the provision makes perfectly good sense if the plan, as often stated by MIT economist Jonathan Gruber, was intended to give states a strong incentive to sign up with the program, even if only 14 states rose to take the bait.

Before we get to the larger problems with relying solely on the words of President, Speaker of the House, Senate Majority Leader, Secretary of State, Prime Minister, and new starting QB of the Philadelphia Eagles Jonathan Gruber, it seems worth noting that Gruber did not actually make the argument that Epstein attributes to him:

In the law, it says if the states don’t provide them, the federal backstop will. The federal government has been sort of slow in putting out its backstop, I think partly because they want to sort of squeeze the states to do it. I think what’s important to remember politically about this, is if you’re a state and you don’t set up an Exchange, that means your citizens don’t get their tax credits. But your citizens still pay the taxes that support this bill. So you’re essentially saying to your citizens, you’re going to pay all the taxes to help all the other states in the country. I hope that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these Exchanges, and that they’ll do it.

Gruber didn’t say that federally established exchanges didn’t provide subsidies in order to squeeze the states. He said that the federal government was delaying setting up the federal backstop in order to squeeze the states. The implication of Gruber’s argument is in fact that the federal backstop would provide the tax credits, but that states couldn’t rely on it being set up immediately. To be clear, this argument doesn’t make any sense either — another reason to ignore what Gruber, who did not vote for or draft the relevant portions of the statute, has to say about it rather than treating him as the authoritative interpreter of the law — but he does not in fact say anything about Congress not making tax credits available to coerce the states.

Which isn’t surprising, since the idea that the ACA went to the the trouble of establishing a federal backstop that would entail having no insurance to sell to no qualified customers is absurd on its face, and is also inconsistent with all of the relevant evidence about legislative history and intent.

Epstein has another strange argument in favor of willfully misconstruing the statute:

During oral argument, Chief Justice Roberts asked whether a different administration could switch interpretations on the statute to meet its own view. Solicitor General Verrilli answered, incorrectly, that such a switch is possible only if the new government could make out “a very strong case” in view of the “disruptive consequences” that such a shift would have. But in fact, Chevron itself involved just that kind of switch between the Carter and Reagan administrations, and no one required the substantial showing of cause that Verrilli mentioned.

Unfortunately, such disruptive flip-flops are all too possible under Chevron. That is the strongest reason why the question should be treated as a question of law, which makes it impossible for one administration to reverse the decision of its predecessor.

The correct answers to the question of whether a future Republican administration could deny subsidies on the federal exchanges if the Court decides to uphold Burwell based on Chevron deference are “yes” and “your point being?” Changes in regulatory policy are things that happen when new administrations are elected. I doubt that a future administration would in fact reverse this IRS regulation, but 1)that doesn’t mean that it’s beyond their authority, and 2)if Republicans want to deny subsidies on the federally established exchanges, it should be done through a Republican White House rather than having the courts do their dirty work.

This isn’t to say that I wouldn’t decide this as a question of law — the Court should rule that the statute, properly construed, makes the credits available on federally established exchanges — but Chevron deference would certainly be more plausible than determining that Congress established a federal backstop it knew would serve no purpose.

And finally, the inevitable punchline:

The better choice, on balance, seems for the Court to strike down the IRS regulation and for Congress to work out some fix. That fix should not include expanding the coverage to federal exchanges, which would allow the Obama administration to work an illicit extension of the initial program. A far better suggestion is to make block grants to the states, which could fund subsidies to pick up the slack when the IRS regulation is struck down. The Republicans might well pass such legislation quickly and dare President Obama to veto it—which he might do to legitimate his own misconceived legislation.

I don’t know what’s funnier — the idea that there’s any chance this Republican Congress would pass a fix, his preemptively blaming Obama for the chaos of the Supreme Court wrecking the exchanges, or the assertion that it would be “illicit” for Obama to continue to provide tax credits on federal exchanges if he was explicitly authorized by Congress to do so. The assumption-without-argument that “block grants” would be better than a uniform federal exchange even though most states have demonstrated neither the willingness or the competence to establish exchanges is also unintentionally amusing. A definitive version of ACA trooferism, in other words.

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  • Denverite

    A far better suggestion is to make block grants to the states, which could fund subsidies to pick up the slack when the IRS regulation is struck down.

    You mean a regime where states are given a sum equal to the subsidies their residents would receive on the federal exchange, and they can use that money to implement some other sort of system, so long as it covers at least as many people?

    Um, Rich, slight problem with that fix. It’s already in the ACA:

    http://healthaffairs.org/blog/2014/12/05/section-1332-waivers-and-the-future-of-state-health-reform/

    You should go back to throwing chalkboard erasers at law students. If you have no clue what’s in the law you’re criticizing, you probably shouldn’t be criticizing it. It makes you look like an imbecile.

    • Scott Lemieux

      You should go back to throwing chalkboard erasers at law students

      CAN WE HAZ LINK NOW?

      • Denverite

        The fact that I remember when there was once a time when cell phones were just phones and not everything was captured on video makes me feel old.

        • Scott Lemieux

          Are you saying you witnessed it first-hand? Even more awesome.

          • Denverite

            I wasn’t in that section. But word of the incident spread quickly.

            • postmodulator

              The right to assault one’s students is central to academic freedom.

        • DrDick

          Think how those of us who remember when all phones were attached to the wall and when you lifted up the phone an operator answered and made the call for you feel.

          • mds

            Looxury. I notice you didn’t mention the strain of having to turn a crank too. (And by mentioning a crank, I’ve managed to bring this diversion back on topic.)

          • rea

            I can remember party lines–you’d pick up the phone and excuse yourself to the people already talking . . .

            • DrDick

              Me, too.

          • njorl

            I remember my first call. My boss wanted to see me. turns out he had spilled battery acid and wanted my to deal with it. Bastard.

    • howard

      i’m sorry, i have to ask: the backstory here is?

      • Lee Rudolph

        !ql∋H

      • Denverite

        There’s no backstory to the point that the ACA DOES envision an alternative “block grant” system where states can just get their subsidy money up front and use it to come up with an alternative to the ACA’s exchange system — provided, of course, that they can cover the same number of people. Vermont started to go down that road for a planned single payer system but had to abandon it for a variety of reasons.

        Epstein didn’t know that. That makes his criticism automatically suspect.

        (The eraser bit is a reference to an incident when — IIRC — he thought a student was playing on her [I think it was a her] computer and not paying attention to him so he pegged a chalkboard eraser at her/her computer.)

        • rewenzo

          Where was this? I had him for torts at NYU, and I don’t recall hearing about this.

          • Denverite

            Not NYU. But also torts.

        • howard

          i meant the backstory to the eraser bit so thanks.

  • MartinAlexander

    The problem with block grants is that states then end up setting crazy requirements so it doesn’t cover anyone and then use the block grants to plug budget holes created by idiotic tax cuts. See any number of states.

    • howard

      i have to admit, the “block grants” touch is an especially amusing coda.

  • so-in-so

    Since the Right Wing decided to add shouts of “you lie” to acceptable Congressional decorum, they surely wouldn’t complain if that were extended to every ACA Toofer’s public appearance or even the Soliciter General’s response to opposing council. Why, I personal think it should be allowed in response to Scalia’s ruminations from the bench at a minimum. I do realize that this revelation is too late for the actual oral argument, but maybe it should become standard for all King supporter public appearances.

    • Ken Kelly

      In response to RBG asking how exchanges without subsidies could offer any benefits, being as they would have no products to offer and no customers to offer them to anyway, Carvin came back with this mendacious two-fer:

      “Well, three points. One is we know textually that they thought Exchanges without subsidies work, because, again, they have Territorial exchanges, and the government concedes no subsidies.”

      I wonder if anyone has gotten away with key falsehoods like this in an oral argument before.

      For the record, of course Congress allocated money specifically for subsidies in Territorial Exchanges, and no, the government never suggested otherwise – they merely acknowledged that tax credits are not available in the Territories (duh).

      Carvin’s other two points were also wrong, but not so blatant as to warrant the response “You lie!”. There was definitely a missed opportunity here.

  • mpowell

    Regarding your last paragraph, I have an opinion on which is the funniest/most ridiculous: that it would be illicit for the administration to continue providing subsidies after receiving explicit instructions for congress to do so. That doesn’t make sense, even within the bubble of ACA trooferism.

    • MDrew

      It’s not that it doesn’t make sense, it’s that it’s absurd.

    • David Hunt

      It’s illicit because a Democrat would be doing it. The only people who can legitimately obtain power are Republicans, so anything done in an official capacity that serves an end other than furthering Republican policy preferences is illicit, at best.

      Or Epstein just decided that the word “illicit” was the slur that he felt like using at the moment.

      You can take your pick or decide that both apply. They’re not exclusive.

    • This comes from Yet Another Republican Redefinition a la what Jonathan Bernstein sees in their war on budgeting:

      Now, you may note at this point that there’s nothing in that formula to make government revenues equal government spending. As far as I can tell, that’s correct; conservatives aren’t interested in that question. Oh, there’s plenty of lip service about “budget deficits,” but the point is that they’ve never made sense if you read “budget deficit” as “government revenues minus government spending.” It does, however, suddenly make sense if you translate “budget deficit” to mean “unwarranted spending or taxes.” Regardless, that is, of how changes in that would add up.

      or:

      3. I’ve found that for many Republican politicians, balancing the budget means “stop spending money on programs we don’t like.” That’s the sense under which they are just incredulous at the idea that the Affordable Care Act could be good for the budget; for them, it can’t by definition, but only because their definition of “budget deficit” isn’t really about budget deficits. This one also fits with the notion that government “waste” for most people just means “spending on stuff we don’t like.”

      So, “licit” just means “working in our preferred policy space”. Since “our preferred policy space” for Republicans just means “being by and for the benefit of Republicans”, it makes a lot of things illicit.

  • MDrew

    In all seriousness, what the hell is he trying to say with that ‘illicit’ bit?

    • rea

      Well, Obama isn’t legitimately president.

  • Cheerful

    Epstein’s new theory of standing in which people should be able to challenge a bill immediately without waiting to see if anybody is adversely affected is interesting and I am sure he will want it applied to all bills in the future.

    Also interesting was this argument:

    “But that weird interpretation makes hash out of the rest of the statute, where the natural meaning of “such” is that the federal government will establish its own exchange that is the functional equivalent to the state exchange, except for the key fact that it will not be eligible for the subsidy on the state exchange.”

    Which puts more weight on “natural” than I think the word can bear.

    • Denverite

      Epstein’s argument would be borderline plausible if “Exchange” wasn’t a defined term in 1311.

      If, for example, 1321(c)(1)(B)(i) used “Exchange” but 1321(c) (in the last bit) used “exchange,” it would be colorable as to whether “such exchange” meant “an exchange like one established by a state under 1311, only not” or whatnot. But the fact that they both capitalize it means that they’re referring to the same thing.

      Hmmm. I wonder if good ol’ Rich obscures this fact by omitting the capitalization in his piece. Let’s check.

      • Denverite

        Oh what a shocker.

        Another part of the law, section 1321, then qualifies that apparently absolute duty by providing that if the state does not “elect” to establish that exchange by January 1, 2014, or if it otherwise fails to meet the federal requirements for an exchange, “the Secretary [of HHS] shall . . . establish and operate such exchange within the state.”

        Change imbecile to dishonest imbecile.

      • Cheerful

        He doesn’t actually quote the language of the section, thus avoiding the need to grapple with what really is a good natural interpretation.

        Interestingly the paragraph before is indented unlike all the others, indicating some last minute cutting and pasting and, I argue, showing this part gave him greater difficulty than the rest of his argument.

        Now I shall go back and check the kerning.

        • Denverite

          See immediately above. He does quote Section 1321. Inaccurately.

          • Cheerful

            Oops, I missed it there at the beginning. That is pretty dishonest and would be worthy of a judicial tongue lashing by any court that caught it.

            • Lee Rudolph

              I believe judicial tongue baths are the new expectation.

  • Morse Code for J

    Because of the linked article, I now know that there is an organization that exists to remind us of the timeless value of Herbert Hoover’s economic ideas.

    Jesus, libertarians. For people who are all about the free market you don’t seem to understand the concept of branding.

    • Baby Needs-A-Nym

      Assuming that you are talking about the Hoover Institution, I think they stuck with the name because the center was actually founded by Herbert Hoover long before he was president. Still sounds weird, though.

      • humanoid.panda

        Also too, the same center also owns the Hoover Archives- an incredible useful resource for Russian (and many other) historians.

  • Danny

    What is the gist of his argument on the taking’s clause? Can’t read the paper at the link.

    • Denverite

      Anything the government does that has a financial impact on anyone is a taking and there should be compensation. If the government passes environmental regulations that cost a factory money to comply with, that’s a taking and the government should reimburse the factory for those costs.

      • Scott Lemieux

        What’s extra awesome about this argument is that he claims it’s originalist, never mind that it’s about as clear as can be that “takings” were understood in 1789 as only being direct, complete appropriations of property. The idea of a regulatory taking in originalist terms is just absurd.

      • Cheerful

        Does he exempt criminal laws? Because throwing somebody in jail certainly has a financial impact.

        Really, the mind boggles. Would a regulation accompanied by a tax directed at those regulated for the purpose of paying the needed compensation somehow meet his criteria?

    • Hogan

      It’s a book. Here’s the publisher’s blurb:

      If legal scholar Richard Epstein is right, then the New Deal is wrong, if not unconstitutional. Epstein reaches this sweeping conclusion after making a detailed analysis of the eminent domain, or takings, clause of the Constitution, which states that private property shall not be taken for public use without just compensation. In contrast to the other guarantees in the Bill of Rights, the eminent domain clause has been interpreted narrowly. It has been invoked to force the government to compensate a citizen when his land is taken to build a post office, but not when its value is diminished by a comprehensive zoning ordinance.

      Epstein argues that this narrow interpretation is inconsistent with the language of the takings clause and the political theory that animates it. He develops a coherent normative theory that permits us to distinguish between permissible takings for public use and impermissible ones. He then examines a wide range of government regulations and taxes under a single comprehensive theory. He asks four questions: What constitutes a taking of private property? When is that taking justified without compensation under the police power? When is a taking for public use? And when is a taking compensated, in cash or in kind?

      Zoning, rent control, progressive and special taxes, workers’ compensation, and bankruptcy are only a few of the programs analyzed within this framework. Epstein’s theory casts doubt upon the established view today that the redistribution of wealth is a proper function of government. Throughout the book he uses recent developments in law and economics and the theory of collective choice to find in the eminent domain clause a theory of political obligation that he claims is superior to any of its modern rivals.

      Epstein has a summary here that should be open access.

      • liberal

        Epstein’s theory casts doubt upon the established view today that the redistribution of wealth is a proper function of government.

        That’s funny, because the largest redistribution of wealth by the government is from those who own no or little land to those who own lots of it (to the tune of $1T to $3T/year). Of course, an advocate of slavery propertarianism would have it no other way.

      • JustRuss

        Workers’ comp is a taking? I suppose paid overtime, health and safety regulations are takings too in Epstein’s world.

        • Scott Lemieux

          paid overtime, health and safety regulations are takings too in Epstein’s world.

          Yes. (Really.)

  • njorl

    Creative quoters of Gruber can use this:

    “Here’s what Gruber said about the ACA:”

    “…they want to sort of squeeze the states to do it. I think what’s important to remember politically about this, is if you’re a state and you don’t set up an Exchange, that means your citizens don’t get their tax credits.”

  • matt w

    Back when I occasionally toiled in the lonely field of teaching business ethics, I sometimes taught an Epstein article on at-will employment, which had IIRC an argument that we can tell at-will contracts are good for employees because they are so widespread.

    Once for a giggle I looked up his CV and I’m pretty sure he’s never worked on an at-will contract in his life.

  • mikeSchilling

    new starting QB of the Philadelphia Eagles Jonathan Gruber

    You say that as if he’d be worse than Sam Bradford.

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