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Substantive Due Process and the Libertarian/Conservative Schism

2010-06-27T10:51:00.000-07:00

This article from Reason magazine discusses a split between libertarians and conservatives on certain aspects of judicial philosophy. In this post, I will focus on its discussion of the libertarian effort (opposed by many conservatives) to enforce economic liberties through, among other things, Lochner-style substantive due process. Although I'm philosophically a small-l libertarian (by which I mean that I lean liberal on social policy and pro-market on economics), I disagree with this effort because it's not jurisprudentially sound.

Substantive Due Process

The article principally suggests that libertarian scholars sympathize with the use of the so-called substantive due process doctrine embodied most famously in Lochner v. New York, 198 U.S. 45 (1905).

In Lochner, the Supreme Court struck down a state law prohibiting an employee from working for more than ten hours per day or sixty hours per week, ruling that the “general right to make a contract in relation to his business is part of the liberty of the individual protected by the [Due Process Clause of the] Fourteenth Amendment.” Id. at 53. Although Lochner itself has effectively been overruled, the substantive due process doctrine is still very much alive today, albeit in a form that protects social rather than economic rights. See Washington v. Glucksberg, 521 U.S. 702, 720 (1997) (collecting cases).

The Fourteenth Amendment’s Due Process Clause provides that no state shall “deprive any person of life, liberty, or property, without due process of law.” The Clause undisputedly protects against deprivations of life, liberty, or property that are procedurally deficient. In my opinion, the best—and, frankly, obvious—reading of the Clause maintains that it protects only this; that “liberty is not guaranteed absolutely against deprivation, only against deprivation without due process of law.” Roe v. Wade, 410 U.S. 113, 173 (1973) (Rehnquist, J., dissenting).

Under the substantive due process doctrine, however, the Clause also “‘protects individual liberty against certain government actions regardless of the fairness of the procedures used to implement them.’” Glucksberg, 521 U.S. at 719-20 (quoting Collins v. Harker Heights, 503 U.S. 115, 125 (1992)) (some internal quotations omitted).

As noted above, the substantive due process doctrine has been invoked to protect social liberties as well as economic ones, and to immunize them from interference by the democratic process. Indeed, this is its primary use today. See, e.g., Lawrence v. Texas, 539 U.S. 558, 578 (2003) (invoking the Due Process Clause to strike down a statute criminalizing homosexual sexual activity); Planned Parenthood v. Casey, 505 U.S. 833, 869, 874 (1992) (plurality opinion) (holding that a woman’s right to terminate her pregnancy is a protected interest under the Due Process Clause).

Strangely, the more socially liberal justices (along with a number of liberal scholars) oppose Lochner while supporting the analysis in cases like Lawrence and Casey. In an apparent attempt to justify this discrepancy, the plurality opinion in Casey argued that “the interpretation of contractual freedom protected in [Lochner’s progeny] Adkins [v. Children’s Hospital] rested on fundamentally false factual assumptions about the capacity of a relatively unregulated market to satisfy minimal levels of human welfare.” Casey, 505 U.S. at 861-62. That may be, but it’s not why Lochner is wrong. Just as “[t]he Fourteenth Amendment does not enact Mr. Herbert Spencer's Social Statics,” Lochner, 198 U.S. at 75 (Holmes, J., dissenting), it does not enact a rival economic theory either. To hold that Lochner was wrong because the economic theory underlying it was wrong is to hold that Lochner would have been right had the underlying economic theory been right—that is, it is to hold that constitutional law boils down to a policy dispute. This can’t be, so Casey’s view must be wrong.

By the same token, the Constitution doesn’t ordain one moral conception of liberty over another, in matters such as abortion or homosexuality. To hold that it does is to resurrect Lochner—after all, if the Due Process Clause protects social liberties, why wouldn’t it also protect economic liberties? And because almost every law affects liberty—because law by definition constrains liberty—the Supreme Court has conferred immense, and unwarranted, power on itself by adopting, and reviewing laws under, the substantive due process doctrine. As the great liberal originalist Justice Hugo Black once noted, “any limitation upon [the Supreme Court’s] using the [substantive] due process philosophy to strike down any state law, dealing with any activity whatever, will obviously be only self-imposed.” See Griswold v. Connecticut, 381 U.S. 479, 523-24 (1965) (Black, J., dissenting).

Time has borne out Justice Black’s point, as the Court’s substantive due process case law has become increasingly untethered from any limiting principle. In Lawrence v. Texas, the Court quoted the Casey plurality’s statement that “‘[a]t the heart of liberty is the right to define one’s own concept of existence, of meaning, of the universe, and of the mystery of human life.’” Lawrence, 539 U.S. at 574 (quoting Casey, 505 U.S. at 851). Referring to this quixotic statement as Casey’s “famed sweet-mystery-of-life passage,” Justice Scalia trenchantly observed that, if it “calls into question the government’s power to regulate actions based on one’s self-defined ‘concept of existence, etc.,’ it is the passage that ate the rule of law.” Lawrence, 539 U.S. at 588 (Scalia, J., dissenting) (emphasis omitted). Indeed, this rule could outlaw any law, even the most necessary and inarguable: what if one’s “concept of existence” and “meaning” includes pedophilia or serial murder? Of course, no Supreme Court would legalize these monstrosities; the point is simply that, under this rule, anything can be declared a constitutional right.

Such a rule embodies the danger of substantive due process analysis: based on the flimsiest reading of the Constitution’s text, it confers on judges the de facto power to cast a permanent veto on any legislation of which they disapprove, one that can only be bypassed by constitutional amendment. Justice Holmes once expressed the better understanding of a judge’s role—one which is unfortunately lost on many liberal and libertarian legal scholars alike: “I think the proper course is to recognize that a state legislature can do whatever it sees fit to do unless it is restrained by some express prohibition in the Constitution of the United States or of the State, and that Courts should be careful not to extend such prohibitions beyond their obvious meaning by reading into them conceptions of public policy that the particular Court may happen to entertain.” Tyson & Brother v. Banton, 273 U.S. 418, 446 (1927) (Holmes, J., dissenting), quoted in Griswold, 381 U.S. at 523 n.19 (Black, J., dissenting).

Rational Basis Review of Non-Fundamental Liberty Interests

The foregoing discussion has primarily pertained to liberty interests that the Supreme Court deems “fundamental” under the Due Process Clause. Among laws that infringe such interests, only those that are narrowly tailored to achieve a compelling state interest will survive. Glucksberg, 521 U.S. at 721. However, all other laws are subject to so-called rational basis review, under which non-fundamental liberty interests “may be abridged or abrogated pursuant to a validly enacted state law if that law is rationally related to a legitimate state interest.” Lawrence, 539 U.S. at 593 (Scalia, J., dissenting). Because rational basis review is very lenient, and virtually every law withstands it, it is hard to become too upset about it.

But even rational basis review wrongly assumes that the procedural protection conferred by the Due Process Clause has some substantive component. For this reason, I would reject it. Whether the standard of review is strict or lenient, substantive due process review itself is the problem.

This is as good a place as any to note that the Court’s decision in Lawrence, striking down a law that criminalized homosexual sexual activity, appeared to employ rational basis review, because of the wording of its holding and because the Court did not classify the liberty interest at issue therein as a fundamental right. See id. at 578 (holding that “[t]he Texas statute furthers no legitimate state interest which can justify” abrogating the liberty interest at issue (emphasis added)); id. at 586 (Scalia, J., dissenting). Accordingly, one would expect the Court’s analysis to focus on whether the state interest claimed was legitimate and whether the law was reasonably related to that interest. Instead, its opinion focuses almost solely on the importance of the liberty interest. See, e.g., id. at 592 (Scalia, J., dissenting) (quoting examples from the majority opinion showing this emphasis). If this is “rational basis” review, it is unrecognizable in all but name.

I hasten to add that I agree wholeheartedly with the policy result in Lawrence. Indeed, I think that the Texas law criminalizing gay sexual activity was outrageous and unjust, and would have voted to repeal it had I been a member of the Texas Legislature. But individual conscience is not constitutional law, and anyone who decides otherwise should be prepared to live with the consequences: constitutional law would become lawless, and cases would be determined only by the whims and caprices of the nine justices sitting on the Supreme Court.

The Case for Stare Decisis

I acknowledge that substantive due process has been around for 123 years and probably isn’t going away completely. Even the originalist justices, Justices Scalia and Thomas, have at times accepted the doctrine of substantive due process in its more modest articulation, if only for stare decisis (that is, precedent-respecting) reasons. Under that articulation, the doctrine “protects those fundamental rights and liberties which are, objectively, deeply rooted in this Nation's history and tradition.” Glucksberg, 521 U.S. at 720-21. If this principle is applied rigorously, so that it only includes rights that American law has historically left alone (such as, for instance, the right to have children, see id. at 720), it will “rein in the subjective elements that are necessarily present in due process judicial review,” id. at 722.

Although I disagree with it as a matter of constitutional law, the principle that the government cannot interfere with truly fundamental rights that do not expressly appear in the Constitution is at least arguable—one could argue that, since the Constitution was adopted against a common law background, the federal and state legislatures over which it is supreme can’t interfere with rights in spheres of activity that the common law simply did not regulate at all, and that American law has not regulated up until some recent enactment that is being challenged.

This argument would not be entirely novel. The Court has ruled, for instance, that the text of the Eleventh Amendment must be read in light of its history and common law background. Specifically, it has held that the Amendment’s text alone does not fully define the scope of the sovereign immunity of the several states because the Amendment was simply intended to clarify the part of the broader common law immunity that had been unclear. See Alden v. Maine, 527 U.S. 706, 723-24 (1999); see also Hans v. Louisiana, 134 U.S. 1, 16, 18 (1890).

Two further observations here suffice: First, if the courts proceed under the above justification, it should be very clear that the government had historically refrained from regulating a protected sphere of activity because it was thought to be outside the reach of government power and/or to infringe a fundamental individual right, rather than because that regulation had been contemplated but deemed unnecessary or imprudent at the time, or for other reasons that would undermine a claim that the government could never regulate it. As a corollary, fundamental rights should be derived from an essentially unblemished historical record of non-interference. Rules such as these will prevent the Court’s analysis from becoming hopelessly subjective.

Second, even if the common law background analysis were valid, there would be no reason to tether it to a clause that, on its face, concerns process and not substance.

Although I would dispense with the principles underlying substantive due process entirely in constitutional adjudication, I would find them less objectionable if they were consistently justified and applied in this way. The more conservative justices do tend to stick to the Glucksberg formulation, and, to their credit, they have no interest in resurrecting Lochner-style review of economic regulations. Also, I haven’t seen a case in which any conservative justice (excluding Justice Kennedy) has voted to recognize a new, previously unprotected constitutional right by invoking due process.

In any event, the principles of stare decisis may also justify upholding, at least, the least controversial applications of substantive due process, such as the constitutional right to have children, because legislatures may have relied on such a right being constitutionally protected and, consequently, may not have bothered to fashion their own right. But its application should not be expanded further (assuming it should be expanded at all) without compelling historical reasons.

The Libertarian Defense of Lochner and its Kindred

The article notes that libertarians have defended a pro-Lochner stance by appealing to the Constitution's structure, in which, they claim, “government powers are limited and specified and rendered as islands surrounded by a sea of individual rights.” It contrasts this stance with the principle of judicial restraint, which it defines as judicial deference to the elected branches in close cases, and suggests that conservatives who oppose Lochner (and who maintain that economic regulations such as the one at issue in the case are constitutional) do so due to judicial restraint.

The article proceeds to argue that conservative Supreme Court justices are being inconsistent observers of judicial restraint when they vote to strike down a handgun ban (D.C. v. Heller, 128 S. Ct. 2783 (2008)), a law that prohibits corporations from using general funds for express political advocacy (Citizens United v. FEC, 130 S. Ct. 876 (2010)), and a local government’s attempt to transfer land from one private party to another using eminent domain (Kelo v. New London, 545 U.S. 469 (2005)).

First of all, as a defense of Lochner, the principle that the Constitution envisions islands of government power in a sea of individual rights misses the point. For a law to be unconstitutional, it must violate some specific provision of the Constitution. It's not enough to say that the Constitution has some philosophical preference for individual rights; it concededly vests some degree of power in the government as well, so actual cases must be decided by reference to constitutional text, not philosophical abstractions. As Justice Holmes said in his Lochner dissent, “[g]eneral propositions do not decide concrete cases.” Lochner, 198 U.S. at 76 (Holmes, J., dissenting).

Second, the chief problem with the article’s logic is its assumption that, if you oppose substantive due process, you must favor judicial restraint.

But Lochner is wrong because substantive due process is wrong, independently of whether judicial restraint is right. As I’ve argued above, the Due Process Clause should be interpreted to provide procedural, not substantive, protection. The state law at issue in Lochner should have been upheld because the Constitution plainly didn't forbid it, not because the case was close and the Court should have tipped the scales in favor of government power.

Moreover, there's nothing inconsistent with thinking, on the one hand, that due process is only a procedural right, and, on the other, that courts should enforce substantive constitutional provisions (such as the first eight Amendments in the Bill of Rights) even-handedly, without putting a “thumb on the scales” in the government’s favor in close cases (as judicial restraint would have them do).

Under this theory, the government should win when a law can only be attacked on a substantive due process theory, but its laws may be susceptible to attack if they contravene, for example, the right to bear arms or the text of the Fifth Amendment's Takings Clause (as was arguably the case in Heller and Kelo, respectively). Note that I’m not arguing here that Heller was necessarily right or that Kelo (in which the government won) was necessarily wrong, only that “to pass upon the constitutionality of statutes by looking to the particular standards enumerated in the Bill of Rights and other parts of the Constitution is one thing; to invalidate statutes because of [an] application of [the Due Process Clause] deemed to be above and undefined by the Constitution is another.” Adamson v. California, 332 U.S. 46, 91 (1947) (Black, J., dissenting). (This is a point that Judge Wilkinson’s attack on Heller, based on the description of it in the Reason article, seems to have ignored.)

The Privileges and Immunities Clause

The article also discusses the Privileges and Immunities Clause as a vehicle for enforcing individual rights. First and foremost, it discusses it as an alternative method of incorporating the provisions of the Bill of Rights against the states.

Originally, the Bill of Rights only constrained the power of the federal government. However, since the ratification of the Fourteenth Amendment, the Supreme Court has invoked that Amendment's Due Process Clause in order to incorporate select provisions of the Bill of Rights against the states. It has not incorporated all ten Amendments of the Bill of Rights precisely because it is employing the substantive due process doctrine, under which only those rights that the Court deems “fundamental” or “implicit in the concept of ordered liberty” are incorporated. See Palko v. Connecticut, 302 U.S. 319, 319, 323-327 (1937). In other words, due process-based incorporation rests on classic substantive due process principles, and is vulnerable to the same critique. Indeed, it is subject to an additional critique: that the justices of the Supreme Court have arrogated to themselves the power to determine which provisions of the Bill of Rights are truly “fundamental.”

As the Reason article notes, the Privileges and Immunities Clause of the Fourteenth Amendment provides a stronger alternative justification for incorporation, and for complete incorporation at that. That Clause reads: “No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States.” As the article suggests, Supreme Court jurisprudence starting with The Slaughter-House Cases, 83 U.S. (16 Wall.) 36 (1873), has largely rendered this Clause a dead letter. But I agree with the article that the Privileges and Immunities Clause, by its language and because of compelling historical evidence (discussed in some detail at pages 22 though 28 of the Petitioner’s Certiorari Brief in McDonald v. City of Chicago), should be interpreted to incorporate the individual rights contained in the first eight Amendments in the Bill of Rights to the states. See also Adamson, 332 U.S. at 71-75 (Black, J., dissenting).

However, the libertarian argument goes further than that, suggesting that the Privileges and Immunities Clause protects the “right of armed self-defense” as a fundamental right, regardless of whether the Second Amendment existed. To be fair, there is some historical evidence that the Clause was also intended to encompass unenumerated but fundamental federal rights. See Saenz v. Roe, 526 U.S. 489, 522-27 (Thomas, J., dissenting). Moreover, unlike the Due Process Clause, the text of the Privileges and Immunities Clause clearly refers to substantive rights.

But the lack of specificity in the text of the Privileges and Immunities Clause suggests that an alternative reading is appropriate. After all, as Justice Frankfurter commented in the context of the Due Process Clause, “[i]t would be extraordinarily strange for a Constitution to convey such specific commands in such a round-about and inexplicit way.” Adamson, 332 U.S. at 63 (Frankfurter, J., concurring). As such, based on the history and text of the Privileges and Immunities Clause (passed as part of an Amendment that was ratified shortly after the end of the Civil War), I would read it to require that: 1) the first eight Amendments to the Constitution (that is, the substantive rights found in the Bill of Rights) apply to the States; and 2) the states can't recognize the federal rights of white citizens but deny them to black citizens (or to any other race). The second, non-discrimination principle would apply both to constitutional rights and to other federal rights that do not specifically appear in the Constitution but that states were demonstrably observing as to white citizens. It would act as an Equal Protection Clause about federal rights—which would not be completely redundant, since the text of the Equal Protection Clause itself could be read to concern only a state’s enforcement of its own laws.

Conclusion

The libertarian desire to return to Lochner-style substantive due process is unfortunate. It endorses a doctrine that is plainly incorrect, and that has been used by liberal judges to interfere with the democratic process. Where libertarians have the Constitution on their side, as in their disagreement with Kelo or their proposed method of incorporating the Bill of Rights, I join them. But the substantive due process doctrine should be ended, not expanded, and that is where libertarian jurisprudence and my own part ways.

Is the individual mandate constitutional? Part 5, Addendum

2010-05-31T12:50:00.000-07:00

This is an addendum to my previous blog post in this series, which largely concerned Lopez’s test that, according to Justice Scalia’s interpretation, allows Congress to regulate intrastate, noneconomic activity when such regulation is an essential part of an interstate regulatory scheme. There, I argued that it would be unreasonable to hold that requiring individuals to purchase insurance was an essential part of a scheme to regulate the price of insurance premiums.

However, I came across a stronger argument in the federal government’s brief in Commonwealth of Virginia v. Sebelius. Pages 19-20 of the brief summarize the Commerce Clause arguments in its favor, making several arguments I’ve already addressed. But the brief also argues on page 19 that the individual mandate “prevents individuals from relying on the Act’s reforms (such as the ban on denying coverage for people with pre-existing conditions) to delay the purchase of health insurance until illness strikes. In short, . . . the provision at issue . . . forms an essential part of a comprehensive, intricately interrelated regulatory scheme.”

As I’ve noted previously, the ban on denying coverage for individuals with preexisting conditions is concededly constitutional. And it is true that, in light of this ban, and without an individual mandate, people may wait to be covered until they get sick or hurt, and then buy insurance. Consequently, the ban could result in skyrocketing premiums, with people not paying into the system until they were withdrawing more than they paid in. The mandate purports to avoid this problem by requiring people to buy insurance at the outset instead of waiting until they need it.

This is a powerful argument. Since the preexisting conditions ban would only arise in the insurance context, and the individual mandate is tailored to deal with an adverse side effect that could otherwise emerge out of the ban, accepting the mandate’s constitutionality would not automatically allow Congress to require citizens to purchase any good or service whose price it regulated. Thus, by making this argument, the government has discovered a narrow holding that the courts could hand down that would not confer vast new powers on Congress. Indeed, because of the “essential part” test, the Court’s precedents appear to allow for this regulation already, even when noneconomic, intrastate activity is being regulated.

As I see it, the best argument that the challengers could make in response would center on the lack of enforcement methods for failure to comply with the mandate. The monetary penalty for such failure is collectible by the IRS, but the law appears to deprive the IRS of any ability to collect it if it is not paid, by disallowing criminal penalties or the ability to impose a lien or levy. One caveat: the bill’s wording may allow for other methods of enforcement, as I’m not familiar with all of the methods that appear in Subchapter B of Chapter 68 (to which the bill refers, as quoted at the previous link). But the methods of enforcement that the bill disclaims are the only ways I’m aware of to enforce an unpaid tax or fine (and the articles and comments I’ve read on the subject from various segments of the political spectrum agree).

In light of this, the challengers could argue that, because one wouldn’t expect compliance with an “essential” regulation to be voluntary, Congress must not think that the individual mandate is essential. And, as previously noted, if the regulation of an intrastate, noneconomic activity is not essential to an interstate regulatory scheme, Congress lacks the power to regulate it under current precedent.

This reasoning could be attacked because it creates a somewhat aberrant result, in which Congress has the power to enact an enforceable mandate, but lacks the power to enact an unenforceable mandate. Even if the “essential part” test might lead to this result if applied logically, a court might not apply it in this way because of its strange practical effect, which would grant Congress a greater power but withhold from it a lesser power. All in all, because of the novelty of the individual mandate provision, and because Lopez’s “essential part” test itself is relatively new, it’s hard to say how the test’s application will play out.

In any event, if the case for the mandate ends up being a close call, the validity of the government’s “essential part” argument arising out of the preexisting conditions provision may well become the key question. It’s the strongest argument in favor of the federal government under current precedent.

Of course, the wild card in all of this is that, if the case goes to the Supreme Court (as I expect it will), the Court won’t necessarily follow its precedents to the letter, and may simply craft a new analysis that could be more permissive, or more restrictive, of congressional power. I’ll discuss my own take on what the Commerce Clause should be interpreted to mean in my next post.

6/3/10 UPDATE: The more in-depth analysis in this post and in Part 5 should be read to supersede the analysis in the third and fourth paragraphs of Part 3. However, I'm not going to strike those paragraphs out of Part 3 for two reasons. First, and more prosaically, this blog doesn't have a text strikethrough option. Second, analysis in the fifth paragraph of Part 3 refers back to the analysis in the supserseded paragraphs but is itself still correct.

Is the individual mandate constitutional? Part 5

2010-05-22T11:27:00.000-07:00

In my most recent post of this series, I argued that the individual mandate may be unconstitutional because Congress may only regulate “economic activity” that has substantial economic effects, and because deciding whether to engage in economic activity is not economic activity in and of itself. However, the economic activity requirement may not always apply. Analyzing the Court’s decision in United States v. Lopez, Justice Scalia concluded that “Congress may regulate even noneconomic local activity if that regulation is a necessary part of a more general regulation of interstate commerce.” Gonzalez v. Raich, 545 U.S. 1, 37 (2005) (Scalia, J., concurring in the judgment) (citing United States v. Lopez, 514 U.S. 549, 561 (1995)).

Under this reading, regulation of intrastate noneconomic activity can only be upheld if it is an “‘essential part’” of Congress’s regulation of an interstate market whose elimination would “‘undercut’” the regulatory scheme. Id. at 36 (Scalia, J., concurring in the judgment) (quoting Lopez, 514 U.S. at 561). Justice Scalia maintains (correctly, I think) that this power is derived from the Necessary and Proper Clause, id. at 34, 37-38 (Scalia, J., concurring in the judgment), which gives Congress the power to “[t]o make all Laws which shall be necessary and proper for carrying into Execution the [enumerated] Powers.” U.S. Const. art. I, § 8, cl. 18. According to precedent, regulations that are “‘reasonably adapted’” “means” to a “legitimate end under the commerce power” should be upheld under the Necessary and Proper Clause. Raich, 545 U.S. at 37 (Scalia, J., concurring in the judgment) (quoting United States v. Darby, 312 U.S. 100, 121 (1941)); see also McCulloch v. Maryland, 4 Wheat. (17 U.S.) 316, 421 (1819).

The tests in Lopez and Darby may appear to set forth dueling standards—must a regulation of intrastate, noneconomic activity be “essential,” or may it simply be “reasonably adapted?” I think they can be harmonized by understanding that, because intrastate, noneconomic activity is being regulated, its regulation is “reasonably adapted” only when it is an “essential part” of an interstate regulatory scheme. In other words, in this context, the “essential part” test determines whether the regulation is necessary and proper.

Legislation that attempts to control prices is a legitimate end under, at the very least, Wickard v. Filburn. But it is hard to argue that the individual mandate is an “essential part” of a price regulation scheme. Less draconian measures have been used in all previous price regulation schemes, and in all other currently existing schemes to regulate prices. Was it essential for Congress in the Wickard era to require every individual to buy wheat in order to regulate prices in the wheat market? Obviously not—which is why it didn’t. And there is no reason for a court to conclude that requiring individuals to buy a product has suddenly become essential when regulating its price. So the federal government cannot get around Lopez’s economic activity requirement by invoking its noneconomic regulatory exception.

A few other arguments are worth addressing in brief: First, the federal government might argue that, if Congress can prohibit a person from buying marijuana, similar logic should enable it to require that a person buy health insurance. Contrary to what I argued in my last post, doesn’t prohibiting someone from buying marijuana determine whether, and not how, to engage in an economic transaction?

This superficial similarity hides a crucial distinction. When it prohibits the purchase of (for instance) marijuana, Congress uses its power to regulate the use of the channels of interstate commerce. This power enables Congress to prohibit movement across state lines, see, e.g., Lottery Case, 188 U.S. 321, 354 (1903), and is a completely separate power from Congress’s ability to regulate substantial interstate economic effects, on which the individual mandate is supposedly based. See Lopez, 514 U.S. at 558.

Of course, Congress’s power to forbid the intrastate purchase of a commodity whose interstate sale is forbidden cannot be explained solely by its ability to regulate interstate channels, but, given the fungibility of most commodities, forbidding intrastate sale may be said to be an essential part of the interstate regulatory scheme that falls within the power conferred by the Necessary and Proper Clause. See Raich, 545 U.S. at 40-41 (Scalia, J., concurring in the judgment).

A second argument worth addressing: the federal government could try to draw an analogy to the fact that state law may require individuals to possess car insurance. But the U.S. Constitution doesn’t limit the power of state legislatures. So even though state law can compel individuals to buy insurance in certain circumstances, that doesn't mean that federal law can.

Moreover, it’s far from clear that the circumstances surrounding car insurance and health insurance are analogous. You only need to buy car insurance if you drive a car on public roads—a privilege. The government can require you to do a number of things if you want to avail yourself of a privilege—for instance, you also need a driver's license in order to drive on public roads, and you need a license in order to practice medicine or sell alcohol. But under the individual mandate requirement, if you’re alive and you don’t already have health insurance, you must buy it. You can't choose whether or not to avail yourself of a privilege before the obligation to buy insurance attaches.

A third argument worth discussing: challengers could argue that health insurance is a purely intrastate market, because federal law gives states the right to regulate health insurance plans, which states have done, and which has generally led insurance subsidiaries to only offer plans within a given state. Also, the health insurance exchanges that the new legislation sets up are intrastate exchanges.

However, even if subsidiaries operate wholly intrastate, their parent companies are often national—which probably generates a sufficiently interstate component to the health insurance market. I doubt that the intrastate insurance exchanges would undermine that interstate nexus. The phrase “interstate commerce” has become somewhat synonymous with the phrase “national economy.” See, e.g., United States v. Morrison, 529 U.S. 598, 610-11 (2000) (quoting Lopez, 514 U.S. at 573-74 (Kennedy, J., concurring)); see also Lopez, 514 U.S. at 563-64 (majority opinion); id. at 626 (Breyer, J., dissenting). I don’t condone this definitional blurring (consider in particular that the text of the Commerce Clause doesn’t actually contain the phrase “interstate commerce” but simply gives Congress the power “[t]o regulate Commerce . . . among the several states,” making this drift in meaning even more dubious), but I suspect that it’s a fact of life. As such, I don’t think that the challengers are pressing this argument in their litigation, probably because they feel that the courts would be unreceptive.

In my next post, I’ll give some of my own thoughts on the proper interpretation of the Commerce Clause.

Is the individual mandate constitutional? Part 4

2010-04-28T02:05:00.000-07:00

So far in this series of posts, I have given a brief outline of congressional power generally and under the Commerce Clause specifically, discussed several salient precedents, and set forth arguments that the government could make in favor of the constitutionality of the individual mandate. (Previous posts are here: Post 1, Post 2, and Post 3.) In this post, I’ll cover the basic arguments that the challengers to the individual mandate’s constitutionality could make.

Congress’s commerce power is certainly broad, as can readily be seen from Gonzales v. Raich, 545 U.S. 1 (2005), and, given its record in Commerce Clause cases over the last 75 years, it’s hard not to conclude that the federal government has a sort of home-field advantage on this turf. But the constitutional challenge to the individual mandate is not frivolous. The challengers’ argument starts with a simple, startling observation that, as far as I know, is true: no federal law has ever required that private citizens enter into an economic transaction with a private entity, until now. If that is so, then (the challengers can argue) the Supreme Court cannot simply apply preexisting precedent, and the federal government cannot simply argue that the mandate is, in its constitutional aspect, analogous to other laws it has previously passed. Instead, the Court would have to extend the scope of its precedents in order to cover the government’s newfound assertion of congressional power.

Still, the challengers need to show that the mandate is genuinely different from exercises of the commerce power that have previously been upheld. Without a foothold in existing doctrine, the challengers are merely begging the question. I think they’ll find their foothold in the requirement that Congress regulate only economic activity that has a substantial economic effect. See United States v. Lopez, 514 U.S. 549, 560 (1995) (“Where economic activity substantially affects interstate commerce, legislation regulating that activity will be sustained." (emphasis added)); United States v. Morrison, 529 U.S. 598, 610 (2000) (quoting Lopez), quoted in Raich, 545 U.S. at 25. Raich hewed to this rubric by holding that intrastate possession of marijuana that had not been purchased was nevertheless part of a larger class of “quintessentially economic” activity, and that Congress had the right to make a policy judgment that included the “narrower class of activities within the larger regulatory scheme.” Raich, 545 U.S. at 25-26 (internal quotations omitted). Raich distinguished its holding from the holdings of Lopez and Morrison, in which the statutes at issue had been struck down, by invoking this economic/non-economic distinction. See id. Accordingly, the challengers could argue, Congress cannot require that people purchase health insurance, because the decision whether or not to engage in economic activity is not itself an economic activity.

In the online debate that I discussed in my last post, Dean Chemerinsky asserts that, “if I decide to buy or not buy something, that is economic activity. Those not purchasing health insurance have a substantial economic effect on interstate commerce.” But this blurs the line between the two distinct requirements of the substantial economic effect test: that an activity be economic, and that it have a substantial economic effect on interstate commerce. Just because an activity has a substantial economic effect does not automatically make the activity economic; otherwise, the two parts of the test would collapse into one. See Lopez, 514 U.S. at 566-68 (suggesting that a robust economic/noneconomic activity distinction provides an important limitation on Congress’s enumerated powers).

This analysis dovetails into Dean Chemerinsky’s argument, summarized in my last post, that the holdings of Wickard v. Fillburn and Raich show that an activity can be considered “economic” even if it does not involve an economic transaction. While this is concededly true, it does not end the inquiry. The activity in both of those cases was regulable because the class of activity (growing wheat, in Wickard; possessing marijuana, in Raich) fell within Raich’s definition of economic activity: activity involving “the production, distribution, and consumption of commodities.” Raich, 545 U.S. at 17-21, 25-26 (internal quotations and citation omitted). By contrast, deciding whether to purchase health insurance does not seem to fall within this definition, any more than deciding whether to produce, distribute, or consume a commodity is itself an economic activity.

Taking another tack, Dean Chemerinsky argues that the cases which establish Congress’s power “to require that hotels and restaurants serve racial minorities” show that “the refusal to engage in an economic transaction” may be “deemed economic.” See Heart of Atlanta Motel, Inc. v. United States, 379 U. S. 241 (1964); Katzenbach v. McClung, 379 U. S. 294 (1964). But these cases pertained to hotel owners and restaurateurs who were already engaged in economic activity, and federal law simply told them that, if they chose to enter into economic transactions, they had to do so on a non-discriminatory basis. It was not compelling them to engage in those transactions in the first place. In other words, the laws at issue in these cases still regulated economic activity, because they told sellers of goods and services how to engage in economic transactions, not whether to do so.

And so, the challengers can argue, with the health care law. Congress can regulate how insurance companies engage in their economic transactions by, for instance, requiring that companies not discriminate against individuals with preexisting conditions. (Whether or not that provision of the law is wise, it is pretty clearly constitutional under current law.) In so doing, Congress has defined the parameters of an economic transaction—a fairly straightforward regulation of economic activity, and one that is akin to the anti-discrimination laws addressed in Katzenbach and Heart of Atlanta in an important respect: it prohibits the seller from differentiating among potential clients on the proscribed basis. Such regulation of economic activity is qualitatively different from requiring that an individual enter into an economic transaction in the first place—which, under the challengers’ argument, Congress has never had the power to do.

In a sense, the novelty of the individual mandate aids the challengers—if the mandate is truly unprecedented, then, by definition, no precedent could support it. But that’s a double-edged sword, because no precedent forbids it yet, either. Given that the history of the Commerce Clause in the 20th century was primarily a history of the commerce power’s expansion, the government has reason to hope. On the other hand, the Supreme Court may decide that the individual mandate goes too far by requiring that private citizens enter into economic transactions with other private entities.

My next post will tie up some loose ends in my summary of the Commerce Clause debate.

PowerPoint is the Enemy...

2010-04-27T11:43:00.000-07:00

Interesting article in the New York Times today. It discusses how PowerPoint now dominates military planning. As one Marine put it, “It’s dangerous because it can create the illusion of understanding and the illusion of control,” General McMaster said in a telephone interview afterward. “Some problems in the world are not bullet-izable.” Having spent countless hours with some of the CJ-9 officers in Iraq, I can vouch for the legitimacy of this article -- if there was a meeting / planning session, it was likely that a PowerPoint presentation accompanied the meeting.

We Have Met the Enemy and He Is PowerPoint

By ELISABETH BUMILLER

WASHINGTON — Gen. Stanley A. McChrystal, the leader of American and NATO forces in Afghanistan, was shown a PowerPoint slide in Kabul last summer that was meant to portray the complexity of American military strategy, but looked more like a bowl of spaghetti.

“When we understand that slide, we’ll have won the war,” General McChrystal dryly remarked, one of his advisers recalled, as the room erupted in laughter.

The slide has since bounced around the Internet as an example of a military tool that has spun out of control. Like an insurgency, PowerPoint has crept into the daily lives of military commanders and reached the level of near obsession. The amount of time expended on PowerPoint, the Microsoft presentation program of computer-generated charts, graphs and bullet points, has made it a running joke in the Pentagon and in Iraq and Afghanistan.

“PowerPoint makes us stupid,” Gen. James N. Mattis of the Marine Corps, the Joint Forces commander, said this month at a military conference in North Carolina. (He spoke without PowerPoint.) Brig. Gen. H. R. McMaster, who banned PowerPoint presentations when he led the successful effort to secure the northern Iraqi city of Tal Afar in 2005, followed up at the same conference by likening PowerPoint to an internal threat.

“It’s dangerous because it can create the illusion of understanding and the illusion of control,” General McMaster said in a telephone interview afterward. “Some problems in the world are not bullet-izable.”

In General McMaster’s view, PowerPoint’s worst offense is not a chart like the spaghetti graphic, which was first uncovered by NBC’s Richard Engel, but rigid lists of bullet points (in, say, a presentation on a conflict’s causes) that take no account of interconnected political, economic and ethnic forces. “If you divorce war from all of that, it becomes a targeting exercise,” General McMaster said.

Commanders say that behind all the PowerPoint jokes are serious concerns that the program stifles discussion, critical thinking and thoughtful decision-making. Not least, it ties up junior officers — referred to as PowerPoint Rangers — in the daily preparation of slides, be it for a Joint Staff meeting in Washington or for a platoon leader’s pre-mission combat briefing in a remote pocket of Afghanistan.

Last year when a military Web site, Company Command, asked an Army platoon leader in Iraq, Lt. Sam Nuxoll, how he spent most of his time, he responded, “Making PowerPoint slides.” When pressed, he said he was serious.

“I have to make a storyboard complete with digital pictures, diagrams and text summaries on just about anything that happens,” Lieutenant Nuxoll told the Web site. “Conduct a key leader engagement? Make a storyboard. Award a microgrant? Make a storyboard.”

Despite such tales, “death by PowerPoint,” the phrase used to described the numbing sensation that accompanies a 30-slide briefing, seems here to stay. The program, which first went on sale in 1987 and was acquired by Microsoft soon afterward, is deeply embedded in a military culture that has come to rely on PowerPoint’s hierarchical ordering of a confused world.

“There’s a lot of PowerPoint backlash, but I don’t see it going away anytime soon,” said Capt. Crispin Burke, an Army operations officer at Fort Drum, N.Y., who under the name Starbuck wrote an essay about PowerPoint on the Web site Small Wars Journal that cited Lieutenant Nuxoll’s comment.

In a daytime telephone conversation, he estimated that he spent an hour each day making PowerPoint slides. In an initial e-mail message responding to the request for an interview, he wrote, “I would be free tonight, but unfortunately, I work kind of late (sadly enough, making PPT slides).”

Defense Secretary Robert M. Gates reviews printed-out PowerPoint slides at his morning staff meeting, although he insists on getting them the night before so he can read ahead and cut back the briefing time.

Gen. David H. Petraeus, who oversees the wars in Iraq and Afghanistan and says that sitting through some PowerPoint briefings is “just agony,” nonetheless likes the program for the display of maps and statistics showing trends. He has also conducted more than a few PowerPoint presentations himself.

General McChrystal gets two PowerPoint briefings in Kabul per day, plus three more during the week. General Mattis, despite his dim view of the program, said a third of his briefings are by PowerPoint.

Richard C. Holbrooke, the Obama administration’s special representative for Afghanistan and Pakistan, was given PowerPoint briefings during a trip to Afghanistan last summer at each of three stops — Kandahar, Mazar-i-Sharif and Bagram Air Base. At a fourth stop, Herat, the Italian forces there not only provided Mr. Holbrooke with a PowerPoint briefing, but accompanied it with swelling orchestral music.

President Obama was shown PowerPoint slides, mostly maps and charts, in the White House Situation Room during the Afghan strategy review last fall.

Captain Burke’s essay in the Small Wars Journal also cited a widely read attack on PowerPoint in Armed Forces Journal last summer by Thomas X. Hammes, a retired Marine colonel, whose title, “Dumb-Dumb Bullets,” underscored criticism of fuzzy bullet points; “accelerate the introduction of new weapons,” for instance, does not actually say who should do so.

No one is suggesting that PowerPoint is to blame for mistakes in the current wars, but the program did become notorious during the prelude to the invasion of Iraq. As recounted in the book “Fiasco” by Thomas E. Ricks (Penguin Press, 2006), Lt. Gen. David D. McKiernan, who led the allied ground forces in the 2003 invasion of Iraq, grew frustrated when he could not get Gen. Tommy R. Franks, the commander at the time of American forces in the Persian Gulf region, to issue orders that stated explicitly how he wanted the invasion conducted, and why. Instead, General Franks just passed on to General McKiernan the vague PowerPoint slides that he had already shown to Donald H. Rumsfeld, the defense secretary at the time.

Senior officers say the program does come in handy when the goal is not imparting information, as in briefings for reporters.

The news media sessions often last 25 minutes, with 5 minutes left at the end for questions from anyone still awake. Those types of PowerPoint presentations, Dr. Hammes said, are known as “hypnotizing chickens.”

Iran boosts Qods shock troops in Venezuela...

2010-04-21T09:46:00.000-07:00

http://www.washingtontimes.com/news/2010/apr/21/iran-boosts-qods-shock-troops-in-venezuela/

Iran is increasing its paramilitary Qods force operatives in Venezuela while covertly continuing supplies of weapons and explosives to Taliban and other insurgents in Afghanistan and Iraq, according to the Pentagon's first report to Congress on Tehran's military.

The report on Iranian military power provides new details on the group known formally as the Islamic Revolutionary Guards Corps-Qods Force (IRGC-QF), the Islamist shock troops deployed around the world to advance Iranian interests. The unit is aligned with terrorists in Iraq, Afghanistan, Israel, North Africa and Latin America, and the report warns that U.S. forces are likely to battle the Iranian paramilitaries in the future.

The Qods force "maintains operational capabilities around the world," the report says, adding that "it is well established in the Middle East and North Africa and recent years have witnessed an increased presence in Latin America, particularly Venezuela."

"If U.S. involvement in conflict in these regions deepens, contact with the IRGC-QF, directly or through extremist groups it supports, will be more frequent and consequential," the report says.

The report provides the first warning in an official U.S. government report about Iranian paramilitary activities in the Western Hemisphere. It also highlights links between Iran and the anti-U.S. government of Venezuelan President Hugo Chavez, who has been accused of backing Marxist terrorists in Colombia.

• Click here to view the report. (PDF)

The report gives no details on the activities of the Iranians in Venezuela and Latin America. Iranian-backed terrorists have conducted few attacks in the region. However, U.S. intelligence officials say Qods operatives are developing networks of terrorists in the region who could be called to attack the United States in the event of a conflict over Iran's nuclear program.

Qods force support for extremists includes providing arms, funding and paramilitary training and is not constrained by Islamist ideology. "Many of the groups it supports do not share, and sometimes openly oppose, Iranian revolutionary principles, but Iran supports them because they share common interests or enemies," the report says.

Qods force commandos are posted in Iranian embassies, charities and religious and cultural institutions that support Shi'ite Muslims. While providing some humanitarian support, Qods forces also engage in "paramilitary operations to support extremists and destabilize unfriendly regimes," the report says.

The report links Qods force operatives and the larger IRGC to some of the deadliest terrorist attacks of the past 30 years: the bombing of the U.S. Embassy in Beirut in 1983, the bombing of a Jewish center in Argentina in 1994, the 1996 Khobar Towers bombing in Saudi Arabia and many insurgent attacks in Iraq since 2003.

Qods forces in Afghanistan are working through nongovernmental organizations and political opposition groups, the report says. Tehran also is backing insurgent leaders Gulbuddin Hekmatyar and Ismail Khan.

"Arms caches have been recently uncovered [in Afghanistan] with large amounts of Iranian-manufactured weapons, to include 107 millimeter rockets, which we assess IRGC-QF delivered to Afghan militants," the report says, noting that recent manufacture dates on the weapons suggest the support is "ongoing."

"Tehran's support to the Taliban is inconsistent with their historic enmity, but fits with Iran's strategy of backing many groups to ensure that it will have a positive relationship with the eventual leaders," the report says.

In Iraq, Qods forces are supporting terrorists through Iranian embassies. The report says the outgoing Iranian ambassador to Iraq, Hassan Kazemi-Qomi, is a member, as well as the new ambassador in Baghdad, Hassan Danafar.

Iranian support for Shi'ite militants in Iraq has included the supply of armor-piercing explosively formed projectiles, as well as other homemade bombs, anti-aircraft weapons, rockets, rocket-propelled grenades and explosives.

The report says the elite Iranian fighters are controlled by Iran's government, despite efforts by the group to mask Tehran's control.

"Although its operations sometimes appear at odds with the public voice of the Iranian regime, it is not a rogue outfit," the report says. "It receives direction from the highest levels of the government and its leaders report directly, albeit informally, to Supreme Leader Ali Khamenei," the report says.

Kenneth Katzman, a Middle East specialist with the Congressional Research Service, said the report's identification of Qods force operatives in Venezuela is significant.

"The new information on an increased Qods Force presence in Venezuela … amplifies the warnings of some experts about an increasingly close, anti-U.S. relationship between Iran and the government of Hugo Chavez," Mr. Katzman said.

Defense Secretary Robert M. Gates recently played down the growing Iranian influence in the Chavez government. Asked about Iran's ties to Venezuela, Bolivia and Ecuador, Mr. Gates said, "I think it makes for interesting public relations on the part of the Iranians, the Venezuelans."

"I certainly don't see Venezuela at this point as a military challenge or threat," Mr. Gates said during a visit to the region.

The report also states that Iran could conduct a test of a long-range missile by 2015 and now has missiles that can strike all of Israel.

"Iran continues to develop a ballistic missile that can (reach) regional adversaries, Israel and central Europe, including Iranian claims of an extended range variant of the [620-mile-range] Shahab-3 and a [1,242-mile] medium-range ballistic missile, the Ashura," the report says.

The report notes that Iran has the largest missile force in the Middle East, with about 1,000 missiles with ranges of between 90 miles and 1,200 miles. The missile program was developed and expanded with extensive help from North Korea and China, the report says.

The missiles have grown in sophistication with increased accuracy, warhead lethality and advanced technology that includes solid propellent for quick launches and anti-missile-defense capabilities for warheads.

The report says Iran is developing its military forces with some asymmetric weapons, including armed unmanned aircraft and coastal anti-ship missiles that can hit targets throughout the Strait of Hormuz, where up to 40 percent of the world's crude oil passes.

Iran's military is growing but "would be relatively ineffective against a direct assault by well-trained, sophisticated military such as that of the United States or its allies," the report says.

However, Iranian special forces, like the Qods force, "would present a formidable force on Iranian territory," the report says.

The report provides no new details on Iran's covert nuclear program that was described as geared toward developing nuclear weapons. Iran's purchase of advanced Russian S-300 air defense missiles, which so far have not been delivered, are for use at nuclear sites, the report says.

The U.S. is leading a U.N. Security Council effort to sanction Iran for its presumed attempts to develop an atomic weapon in violation of the nuclear Non-Proliferation Treaty.

Is the individual mandate constitutional? Part 3

2010-04-14T23:28:00.000-07:00

In my first and second posts, I gave a broad overview of congressional power and the Commerce Clause, and summarized three major precedents in Commerce Clause law. In this post, I’ll take a first look at how these precedents might apply when determining the constitutionality of the individual mandate by discussing how the federal government could argue in its favor.

The Supreme Court has held that the sale of insurance is “commerce” within the meaning of the Commerce Clause. United States v. South-Eastern Underwriters Assn., 322 U.S. 533, 552-53 (1944). And the applicability of the substantial economic effects test (discussed in my previous posts) to the individual mandate, which requires that non-exempt individuals purchase health insurance, seems to be self-evident: if more people pay insurance premiums, insurance claim costs are more dispersed and the price of insurance goes down. Hence the regulated activity (the purchase of health insurance) will have a substantial economic effect on the interstate insurance market (by affecting premium prices). That’s particularly true because people who would not otherwise buy insurance, were it not for the law, are more likely to be healthy (all things equal). So the government can argue that courts should apply the substantial economic effects doctrine in a straightforward way: Congress has regulated the purchase of health insurance, and this activity has a substantial economic effect on the interstate market for that insurance.

Moreover, although it struck down a law by invoking a limit to Congress’s Commerce Clause power, the Lopez decision nevertheless noted that intrastate activity could be regulated as “an essential part of a larger regulation of economic activity, in which the regulatory scheme could be undercut unless the intrastate activity were regulated.” United States v. Lopez, 514 U.S. 549, 561 (1995). It thereby distinguished its holding, which struck down a criminal statute that stood apart from any regulatory scheme, from such an instance. See id. This reasoning subsequently provided some of the justification for the Supreme Court’s decision in Raich. Gonzales v. Raich, 545 U.S. 1, 23-25 (2005); id. at 36-38 (Scalia, J., concurring in the judgment).

Of course, federal regulation of the health insurance market, even under the new health care bill, isn’t nearly as comprehensive as that of the marijuana market regulated by the Controlled Substances Act, the statute at issue in Raich. In the latter instance, the sale of the commodity (as well as its manufacture, distribution, or possession) is banned entirely. The federal health care bill, by contrast, does not purport to completely control the market for health insurance, nor does it otherwise supplant state insurance regulation. So the government might have a harder case to make in this instance that the individual mandate is an “essential part” of Congress’s regulatory scheme whose absence would “undercut” that scheme. But this line of attack would probably be a dead end for the mandate’s challengers; Congress clearly intended to make health insurance premiums more affordable, and eliminating the individual mandate would undermine that intention. That should be enough to withstand rational basis scrutiny, the most deferential form of constitutional review. See id. at 22.

In any event, it would also be a dead end for challengers to argue that the failure of any given individual to purchase health insurance cannot be regulated because that failure is a purely intrastate activity, or because that one individual’s failure, alone, will not substantially affect the interstate insurance market. First, as noted above, even intrastate activity can be regulated if the failure to regulate it would undercut a constitutional regulatory scheme. Lopez, 514 U.S. at 561; see also Raich, 545 U.S. at 18. Second, under either the “substantial economic effects” justification or the “essential part of a larger regulat[ory scheme]” justification, Wickard and Raich tell us that the key inquiry is whether a regulated activity will, in the aggregate, have a substantial economic effect or undercut the regulatory scheme. So the mandate can be applied to individuals even if any one individual, on his or her own, would not substantially affect the interstate market by purchasing or declining to purchase health insurance. See Wickard v. Filburn, 317 U.S. 111, 127-28 (1942); Raich, 545 U.S. at 19.

The government may have one more hurdle that I haven’t previously noted: it may have to show that the regulated activity (i.e., the decision not to purchase health insurance) that substantially affects interstate commerce is itself an economic activity. Five years before Raich was handed down, the Supreme Court noted that “thus far in our Nation’s history our cases have upheld Commerce Clause regulation of intrastate activity only where that activity is economic in nature,” United States v. Morrison, 529 U.S. 598, 613 (2000), and Raich essentially did not disturb that principle. See Raich, 545 U.S. at 25-26 (noting that the federal Act at issue therein “is a statute that directly regulates economic, commercial activity,” and including within this category the Act’s “[p]rohibiti[on of] the intrastate possession . . . of an article of commerce [i.e., marijuana]”). The challengers to the individual mandate could ask: How can a failure to engage in economic activity constitute economic activity and so satisfy Supreme Court precedent?

The government will have a ready response to this question, probably akin to that articulated by Dean Erwin Chemerinsky of the UC Irvine School of Law in this online debate. Dean Chemerinsky argues that Wickard and Raich itself show that a person can engage in economic activity even in the absence of an economic transaction—indeed, recall from my last post that Wickard’s holding was based in part on the premise that farmer Filburn grew wheat for his own consumption and thus abstained from purchasing wheat in the market, and that this failure to participate in the market had a substantial economic effect on wheat prices in the aggregate and could be regulated by Congress. “If this is economic activity,” Dean Chemerinsky argues, “then certainly the purchase of health insurance (or a refusal to do so) is economic activity.”

As a result, the government should be able to make a fairly strong case under current law that the Commerce Clause authorizes Congress to enact the individual mandate.

In my next post, I’ll discuss some possible counterarguments to the government’s position.

Another nail in Keynes' coffin...

2010-04-14T14:45:00.000-07:00

The great thing about math is that numbers don’t lie. Even if assumptions are overly optimistic or pessimistic, the resulting equation will remain mathematically true. This is the case when analyzing deficit spending and the validity of Keynesian economics, which we’ve discussed previously is on its death bed. Simply put, the math doesn't add up.

There is an interesting analysis that was just released which debunks the claim that "in a recession, government spending (read: deficit spending) is necessary to stave off a deep recession."

Let's start with the conclusion:

The federal government cannot create prosperity by spending funds that it does not have. It can, however, spend us into poverty by taking dollar balances from highly productive individuals and their business entities, through borrowing or taxing. This process of transferring these assets from income and wealth generators to other government applications has profound economic consequences.

The proponents of Keyneisan economics (and deficit spending) must hold these two important factors to be true: 1) the expenditure multiplier (which we discuss here) is greater than 1.00; and 2) increased government spending will not crowd out private business (and growth). If either point #1 or #2 are untrue, the rationale for deficit spending, at least within the confines of a capitalist system, would be intellectually dishonest and merely partisan (see our commentary on Romer later).

Point #1 begins with the notion that massive deficit spending increases the overall economic pie. That is, for every $1 of deficit spending, GDP increases by more than $1. In the last 10 years the deficit as a percentage of GDP has increased from 18.4% to 24.7%. Howevr, during that same time period,

"[t]he percent of the population working today is 58.6% while prior to the large budget deficit spending of the last ten years it was 64.6%. Our GDP was growing at 4.8% ten years ago, and today we are staggering out of recession."

The same holds true for Japan.

"Its government debt soared from 52% of GDP in 1989 to 184% today...GDP in that country is no higher than it was 18 years ago; its employment is no higher than it was 19 years ago, and there is no inflation since consumer prices are at 1993 levels."

How is this possible? It's quite simple really. Government expenditures must come from taxing or borrowing. Period. In both cases, as the analysis points out, resources are shifted from one sector of the economy to another which doesn't expand the economic pie, but merely its composition. There are historical examples where the government expenditure multiplier was 0 (that is, for every $1 of government spending, private spending decreases by a $1) and there are also examples of the multiplier being greater than 0 but less than 1. As the report illustrates,

"during the extraordinary conditions of World War II and the Korean War the multiplier has been calculated as 0.6, meaning that a $1 rise in government spending would lift the economy as a whole by 60 cents while reducing private spending by 40 cents."

In an additional study, the conclusion was the multiplier was 1.1. Eliminating the 0 reading, the average is 0.85. Remember that number.

Point #2 simplistically holds that access to capital (in the fungible and economic sense) and the incentive to acquire / spend such capital remains unchanged in the face of increased deficit spending. However, as mentioned above, governments must tax or borrow in order to spend (which, in the event of massive borrowing will require additional taxes). The key is this:

Beginning January 1, 2011 the sizeable tax reductions enacted in 2001 and 2002 will expire. The administration projects that household taxes will rise by a cumulative $1.1 trillion over the ensuing ten year period, while business taxes will rise by $400 billion. This calculation was prior to any taxes enacted in the healthcare bill, and does not account for other taxes such as the recently mentioned value added tax suggested by administration policy advisors.

Like government spending, there is a tax multiplier, which seeks to answer the same question as the government multiplier, but in reverse. That is "an increase (decrease) in taxes will reduce (increase) GDP by how much?"

Dr. Barro estimates that the tax multiplier is minus 1.1, meaning that a $1 increase in taxes will reduce GDP by $1.10. However, Christina Romer, Chair of the Council of Economic Advisors and her husband David in an exhaustive study published in March 2007 found the tax multiplier to be –3.

If the tax multiplier is applied to the estimated increase in taxes, the drag on economic activity will be "between $1.65 trillion and $4.5 trillion."

So, if the government multiplier (the "revenue" portion of our equation) is 0.85 and the tax multiplier is roughly -2.1 (which is the "expense" portion of our equation) "then mathematically this country cannot spend its way to prosperity." That's because in an extremely overleveraged economy,

"monetary policy doesn’t work. Potential borrowers do not have the balance sheet capacity to take on more debt...Currently, borrowers are loaded with excess houses, office buildings, retail space, and plant capacity. No need exists to get even deeper in debt. Moreover, due to rising foreclosures and delinquencies, bank capital has been badly eroded and banks are not in a position to put more risk onto their balance sheets by lending to already over committed borrowers."

Are moderates moving into "repeal" camp...?

2010-04-12T12:02:00.000-07:00

An interesting poll came out this morning which shows support for repealing the recently passed health care bill is gaining, not losing support (58% favor repeal compared to 38% not in favor of repeal). For more insight into the upcoming legal battles, I would point you to our multi-part introspective analysis here and here. The purpose of the legal analysis is to discuss the potential weight, if any, already filed lawsuits may have. I look forward to the conclusion.

Back to the poll. We're cautious about reading too much into polls, particularly the headline numbers as they can differ wildly. For an idea, Stu Rothenberg gives a concise example of how different polls of the same Senate race can show a completely different picture. What is important are the internals (ie, the numbers that make up the headline number), and the internals of Rasmussen's recent poll depict two important things: 1) there is a +18 point intensity gap between those that strongly favor repeal compared to those that strongly oppose repeal; and 2) moderate voters are moving into the "repeal" camp.

Let's take each point separately.

1) "There is a +18 point intensity gap between those that strongly favor repeal compared to those that strongly oppose repeal".

Pundits often talk about "intensity gaps" as vital to the success of any election cycle. Intensity gaps can be broad based (ie, in favor / against a given party) or specific (ie, in favor / against a given policy). At the risk of stating the obvious, the higher the motivation, the increased likelihood a given bloc of voters will vote (of course, this assumes candidates' messages are aligned with the issues).

2) "Moderate voters are moving into the "repeal" camp."

According to Rasmussen, "[e]ighty-eight percent (88%) of Republicans and 54% of voters not affiliated with either major party favor repeal." This does not bode well for the Administration's strategy of limiting its losses in November by "rallying the base".

According to a recent Gallup poll 40% of the electorate is conservative, 20% is liberal, and 37% is moderate.

The implication is 40% of the electorate is considered to be in the Republican base, while only 20% of the electorate is in the Democrat base. Winning moderate support is imperative to a successful "base" strategy. It's a large reason Obama won in 2008 (there was also an enormous intensity gap) and it's a huge reason Democrats should be worried come November.

On a side note, voters are starting to associate the health care bill as being bad for the economy, which is not good for those who supported it, particularly since the economy is the most important issue as November inches closer. "Seventy-six percent (76%) of Republicans believe repeal would be good for the economy, while 59% of Democrats believe it would be bad. Among those not affiliated with either political party, 47% believe repeal would be good for the economy, and 29% believe it would be bad." Adding salt to the ever increasing Democrat wound is the second most important issue for voters: health care.

The bottom line is really three-fold: there is a large intensity gap favoring repeal; swing voters are moving into the repeal "camp"; and the economy and health care are no longer exclusive of one another.

Greatest 4 days of the year...

2010-04-08T19:22:00.000-07:00

Since today is the start of arguably the greatest 4-day stretch of the year, I will take a break from politics and focus on the greatest golf event of the year.

First, this is creepy...

Second, is that Peyton Manning in the gallery?...

And, for the "sounds of spring"

http://users.rcn.com/rjparadis/music/Augusta_Dave_Loggins_instrumental.mp3

Likely winners & losers in 2011 redistricting...

2010-04-08T13:19:00.000-07:00

The past two days, the USA Today has printed two very interesting maps on page one which depict the likely Electoral College gains and losses as a result of the upcoming redistricting process, which I've written previously. The estimates assume 2010 census data, which the 2011 redistricting process will rely on, mirror 2009 population estimates. If the data is relatively the same, the sun-belt will pick up +8 (net) electoral votes, while the rust-belt will lose -8 (net).

Winners...

Source: USA Today

Losers...

Source: USA Today

Is the individual mandate constitutional? Part 2

2010-04-08T02:14:00.000-07:00

In my last post, I gave a brief overview of the limitations on congressional power generally, and on the Commerce Clause power specifically. I noted that Congress may invoke its Commerce Clause power to regulate three categories: 1) the use of the channels of interstate commerce; 2) the “instrumentalities of interstate commerce;” and 3) activities that “substantially affect” interstate commerce. See, e.g., United States v. Lopez, 514 U.S. 549, 558-59 (1995).

The individual mandate obviously doesn’t fit into either of the first two categories, but that shouldn’t particularly concern its proponents; the substantial economic effects test is the most frequently used category to justify congressional action pursuant to the Commerce Clause.

There are literally thousands of pages of Supreme Court opinions on the Commerce Clause, many of which pertain in whole or in part to the substantial economic effects test. Since I can’t canvass each of these opinions in depth, this post will instead summarize three cases that are more or less representative of the Court’s precedents in this area. I had originally intended to analyze the application of these precedents to the individual mandate in this post, but given its length as is, I will leave that analysis for a subsequent post.

The 1942 case Wickard v. Filburn provides a good example of the expansive reading of congressional power under the Commerce Clause that emerged during the New Deal. The Agricultural Adjustment Act of 1938 required farmers to produce only a certain amount of wheat, in an attempt to restrict the volume of wheat in the market and thereby to control wheat prices. In Wickard, the Supreme Court held that the Act could regulate the excess wheat that a commercial farmer grew on his own farmland for the purpose of personal consumption rather than sale. The Court reasoned that the farmer would otherwise purchase his wheat in the open market, and that, when he was considered along with similarly-situated farmers in the aggregate, their participation in the wheat market (or lack thereof) would affect interstate supply and demand (and would thereby affect prices that Congress was trying to regulate). The Court also noted the potential that a change in prices would shift some of that excess wheat into the interstate market, thereby affecting the volume of wheat in that market (and also affecting prices). See 317 U.S. 111, 114-19, 128-29 (1942).

In the 1995 case United States v. Lopez, by contrast, the Supreme Court, for the first time in sixty years, struck down a federal statutory provision on the ground that Congress had exceeded its Commerce Clause power. The statute had outlawed possessing a firearm within 1,000 feet of a school. The government argued that the law regulated an activity that had a substantial economic effect because possession of a firearm in a school zone might result in violent crime (and crime imposes costs on the economy and may inhibit travel) or otherwise hamper public education (which leads to a less productive citizenry and thus to a less productive national economy). The Court ruled that upholding a law that had, in its view, such an attenuated connection to interstate commerce would convert Congress’s power under the Clause into a general police power, a power that the Constitution does not delegate to Congress. 514 U.S. at 563-64, 567-68.

Finally, Gonzales v. Raich, a Supreme Court case from 2005, held that Congress’s power under the Commerce Clause allows it to outlaw the possession of marijuana for medical reasons that the medical patient litigants had either grown, or obtained for free, wholly within a state (California), even where such possession was legal under state law. Drawing parallels with Wickard, the Court ruled that exempting the litigants in Raich from the provisions of the federal Controlled Substances Act, which bans the manufacturing, possession, distribution, or sale of marijuana (and may generally do so because those activities either constitute interstate commerce in and of themselves or else have a substantial effect on the interstate market for marijuana), would leave a “gaping hole” in that Act and hinder Congress’s ability to regulate the interstate market. 545 U.S. 1, 17-22 (2005).

Notably, courts need only apply rational basis scrutiny to the government’s claim that a regulated activity has a substantial economic effect on interstate commerce. E.g., id. at 22 (citing, inter alia, Lopez, 514 U.S. at 557). The rational basis test, which is used in many areas of constitutional law, is notoriously lenient to the legislature; virtually any reason that can be adduced by a legislature in support of its enactment will do.

In my next post, I’ll discuss how the existing Commerce Clause precedent may be applied to the individual mandate.

Book Review: In Our Hands

2010-04-06T14:02:00.000-07:00

Today is the first of a multi-part series dedicated to the review / analysis of Charles Murray's book In Our Hands, which examines government redistribution plans and offers a new approach to social policy. In many ways, entitlement reform is the most important public policy issue facing Americans today and informed, non-partisan, and objective analysis is required. All options should be on the table.

According to the Dallas Federal Reserve, structural deficits inclusive of unfunded liabilities from Social Security and Medicare equates to roughly 700% of GDP (~$104 trilion compared to ~$14 trillion). It is estimated that “for financing future benefits without future tax increases, the United States and major European countries would be required to generate an annual present value surplus in the order of 8–10% of 2005 GDP over the period to 2050.” If those staggering numbers don't have you convinced, considering the following: if the United States freezes relative age-related spending as a % of GDP at projected 2011 levels, in the year 2040 it is estimated that debt/GDP would still be a staggering 200% (blue line). If it does nothing, debt/GDP will be in excess of 400% (red line), and if it reduces funding by 1% for five years starting in 2012 debt/GDP will be 300% (green line). France, Ireland and the UK are the only other countries where freezing age-related benefits will not reduce debt/GDP under any of the three scenarios...

Source: BIS

Estimates vary and depending on assumptions can produce fairly different results. However, what is undebatable is the severeity of the crisis and the implications of doing nothing. Murray's book tries to tackle some of these very questions, and unlike most analyses, he presents an alternative.

There are two tenets upon which the social welfare state was founded: (1) resources are scarce; and (2) the government can allocate scarce resources efficiently. As Murray appropriately acknowledges, the first tenet was largely true for the first half of the 20th century, or at least up until the end of World War Two.

The indigent elderly depend on charity, so let the government provide everyone with a guaranteed pension. The unemployed husband and father cannot find a job, so let the government give him some useful work to do and pay him for it. Some people who are sick cannot afford to go to a private physician, so let the government pay for health care. It turned out not to be simple after all. The act of giving pensions increased the probability that people reached old age needing them. Governments had a hard time finding useful work for unemployed people and were ineffectual employers even when they did. The demand for medical care outstripped the supply. But, despite the complications, these were the easy tasks. Scandinavia and the Netherlands—small, ethnically homogeneous societies, with traditions of work, thrift, neighborliness, and social consensus—did them best.

The second tenet, while the outcomes are charitable in theory, has proven to be too rigid to adjust to modernity.

Traditions decay when the reality facing the new generation changes. The habit of thrift decays if there is no penalty for not saving. The work ethic decays if there is no penalty for not working. Neighborliness decays when neighbors are no longer needed. Social consensus decays with immigration. Even the easy tasks became hard as time went on.

The moral hazard carte-blanche entitlement programs have created over multiple decades has only exacerbated the fragile foundations of America’s entitlement society, and by the 1980s it was clear that government failed, resulting in a twisted irony of sorts. As throughout history, the welfare state, particularly in an open society as complex and vast as the United States, results in a multi-front war of negative feedback loops, eventually leading to the destruction of the policy, and potentially the State. The first thing to go is “the traditions of work, thrift, and neighborliness… [which] spawns social and economic problems it is powerless to solve leading to inevitable insolvency.”

In order to combat insolvency, which is already the case even if the political class doesn’t want to acknowledge it, Murray proposes the elimination of entitlement program payments to individuals which are to be replaced by a $10,000 per year cash payment to anyone over the age of 21. The concept draws on Milton Friedman’s “negative income tax” as proposed in the early 1960s to eradicate poverty which essentially gave a cash payment to those under the poverty line equal to the difference between their income and the aforementioned poverty level. The logic followed that the opportunity cost of a direct cash payment would be less over the long-run when compared to administrating a “complicated welfare system”. Simplistically, Murray’s Plan (as we’ll call it) adheres to the same logic.

The Plan has six major components.

1. Each citizen will be given a Passport (the same as used today when traveling) and will ensure program eligibility.

2. The $10,000 payment will be deposited electronically into a previously established bank account, as set-up by the individual.

3. Earned income up to $25,000 will not be taxed, with a 20% surtax levied on earned income between $25,000 - $50,000 (eg, [$30,000 - $25,000] * 20% = $1,000 tax) up to a maximum of $5,000.

4. There is no Marriage Penalty.

5. Payment should be indexed to either median personal income or inflation.

6. The elimination of most “transfer” payment programs (ie, Social Security, Medicare, etc).

This is merely an introduction and an overview of Murray’s first chapter. There are many questions that arise, particularly at first glance. It will be interesting to see how Murray handles the legal and political aspects of such a drastic overhaul. That said, it’s important to appreciate that Murray, rightly or wrongly, is approaching this debate from two perspectives: 1) government’s role is limited and should be focused on equality of opportunity, not equality of outcomes; and 2) “here’s the money. Use it as you see fit. Your life is in your hands”.

Link to PDF of entire book (or you can buy it for $20): http://www.aei.org/book/846

Is the individual mandate constitutional? Part 1

2010-04-06T02:21:00.000-07:00

A major aspect of the recently-enacted health care legislation is the so-called individual mandate, which requires that all individuals who do not fit a narrow range of exceptions possess health insurance. Those individuals who do not fit one of the exceptions and who do not possess health insurance will have to pay a fine that will be collected by the IRS.

Fourteen states, as well as four individuals, have now filed lawsuits challenging this aspect of the law as unconstitutional. The underlying issue is: Has Congress exceeded its enumerated powers by requiring some individuals to purchase health insurance or else pay a penalty?

With several exceptions not relevant here, Congress may only enact legislation that falls within the scope of the enumerated powers delegated to it by Article I, Section 8 of the Constitution. (All other powers are reserved to the states or to the people by the Tenth Amendment.) In defense of the individual mandate, the government will almost certainly invoke the Commerce Clause, one of Congress’s enumerated powers, and may also invoke the Taxing and Spending Clause as a separate enumerated power that could justify the enactment of the individual mandate.

In this post, I’ll give a brief overview of current Commerce Clause jurisprudence. In my next post, I’ll discuss several particular precedents in this area of the law and how they might affect the constitutionality of the individual mandate. Subsequent posts will discuss the Taxing and Spending Clause and other issues related to the pending lawsuits.

The Commerce Clause gives Congress the power “[t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” U.S. Const. art. I, § 8, cl. 3. The Commerce Clause is most commonly invoked in the context of the second type of commerce, namely, interstate commerce. The Supreme Court has held that Congress may properly invoke its interstate commerce power to regulate three categories of activities or things: 1) the use of the channels of interstate commerce (e.g., transporting a minor across state lines for an immoral purpose); 2) the “instrumentalities of interstate commerce” (e.g., safety regulations for vehicles that transport goods across state lines); and 3) activities that “substantially affect” interstate commerce (e.g., national minimum wage laws, which, among other things, prevent states from lowering their minimum wages to give local corporations an unwarranted advantage over the corporations of other states in interstate commerce).

The government will try to invoke the third, “substantial economic effects” category when justifying the individual mandate. And the Supreme Court has used that category to countenance very expansive exercises of congressional authority. My next post will discuss several seminal cases in Commerce Clause law and their application to the individual mandate issue.

6/3/10 CORRECTION: I've added the phrase “With several exceptions not relevant here, . . . ” to the beginning of the third paragraph. The paragraph as originally written was inadvertently incorrect because it didn't take into account, for instance, the congressional power found in Section 5 of the Fourteenth Amendment.

Housekeeping...

2010-04-05T10:56:00.000-07:00

I'm excited to announce that Morning 'N America will soon introduce guest bloggers that will write on a host of topics. In the coming days and weeks look for an introspective analysis on the legality of the recently passed health care bill.

State races key to 2011 redistricting...

2010-04-05T10:42:00.000-07:00

One of the many issues we're paying attention to is the looming redistricting battles that will play out in 2011. The USA Today provides a nice summary of the importance of state elections in November. Recall that redistricting is a once-a-decade process which uses the Census, among other things, to guide the redrawing of political lines. (note: this is one of the main reasons the Administration's decision to move the Census Bureau from the Commerce Department to the Oval Office was so controversial.) Both parties will focus their attention on the six states "where one chamber of the legislature is within a few votes of switching control." Federal elections get the most media attention, but the legislative agenda in DC over the next 10 years could very well be shaped by a few state-level elections in November.

Possible redistricting lights up state races' fundraising

By Kathy Kiely, USA TODAY

WASHINGTON — As Census workers fan out this month to complete the nation's once-a-decade headcount, leaders of both political parties are amassing war chests for the high-stakes political battle that it will trigger.

Democrats and Republicans are planning to pour at least $20 million each into November's state legislative races that could determine which party controls about two dozen state legislative chambers. And in a case that could go to the Supreme Court, the Republican National Committee is arguing it should be able to add to the pot.

The reason for all the activity: In all but six states, legislatures have a hand in redrawing congressional boundaries after each Census — supposedly to account for population shifts, but usually with a political eye.

That's why both parties are investing in races for state House and Senate.

"If you focus some resources you can have an impact on congressional elections for a decade," says Ed Gillespie, a former national Republican Party chairman and co-chair of the party's effort to win state legislatures.

Democrats are ramping up for a historic fundraising effort. "With the Census and the health care agenda, people are focusing on what these state races mean," says Michael Sargeant, executive director of the Democratic effort.

Republicans are playing catch-up in the redistricting fight. Before congressional boundaries were redrawn in 2001, the GOP controlled governorships and both chambers of state legislatures in 13 states, compared with eight for Democrats.

Since then, Democrats have made steady gains in state legislative races and reversed the equation. Today, Democrats control the governor's office, the state House and the state Senate in 16 states. Republicans have total control in nine states.

There are no federal limits on fundraising because the legislative races are state contests. As a result, six-figure donations are pouring into the parties' legislative committees, from labor unions and wealthy individuals. Money is also coming from corporations banned from making direct contributions in congressional or presidential races.

State legislative races are traditionally the election undercard, overshadowed by races for statewide and federal offices. Fundraising for November's legislative races is expected to break records. "There's little doubt there will be more money spent on legislative races this year than ever," says the National Conference of State Legislatures' Tim Storey.

Contributors to the Democratic Legislative Campaign Committee last year included: AFSCME, the government employees' labor union, which has pitched in about $600,000; Hewlett-Packard, the high-tech manufacturer, $35,000 and Altria, a tobacco and food conglomerate, $100,000. Tim Gill, a gay rights activist from Denver, has contributed $50,000.

Among the Republican State Leadership Committee's backers: retailing giant Wal-Mart with $115,000; oil company Exxon-Mobil, $90,000; online auctioneer eBay, $40,000 and Comcast, the cable TV provider, $81,000.

A federal district court last month rejected the RNC's argument that it should be allowed to raise unlimited campaign funds for state legislative races. The RNC can go to the Supreme Court with its challenge to a federal law that limits the amount of money national parties can collect.

Most attention will focus on states expected to lose or gain congressional seats and where one chamber of the legislature is within a few votes of switching control. Iowa, Nevada, New York, Ohio, Pennsylvania and Texas are among those states.

In Texas, during the last redistricting fight, Democratic lawmakers at one point fled across state lines to avoid voting on a Republican-drawn congressional map. The map ultimately was put in place and helped shift the state's congressional delegation from majority Democrat to majority Republican.

"We understand the consequences of redistricting," says state Rep. Garnet Coleman, a Democrat spearheading his party's effort to win the Texas House.

Ohio's House Republican leader William Batchelder, hoping to reverse his party's minority status, says "it is difficult sometimes to get people focused on legislative races," but believes the best way to win is to highlight pocketbook issues.

That's the "mechanics" of politics, Batchelder says. "It turns most people off."

According to Mankiw, the US is about average on taxes...

2010-03-31T08:49:00.000-07:00

Greg Mankiw posted this today on his blog. Interesting way to look at whether the US is a high/low tax country.

"...Looking at taxes as a percentage of GDP may mislead us into thinking we can increase tax revenue more than we actually can. For some purposes, a better statistic may be taxes per person, which we can compute using this piece of advanced mathematics:

Taxes/GDP x GDP/Person = Taxes/Person

Here are the results for some of the largest developed nations:

France: 0.461 x 33,744 = 15,556

Germany: 0.406 x 34,219 = 13,893

UK: 0.390 x 35,165 = 13,714

US: 0.282 x 46,443 = 13,097

Canada: 0.334 x 38,290 = 12,789

Italy: 0.426 x 29,290 = 12,478

Spain: 0.373 x 29,527 = 11,014

Japan: 0.274 x 32,817 = 8,992

Of course, the US is middle-of-the-pack as it stands today, and after two rounds of tax cuts under Bush, which this administration is intent on letting expire to Clinton-era levels. A more interesting analysis would be to examine the level this administration's policies will raise that number to.

Stay tuned.

Doubling down...

2010-03-30T13:10:00.000-07:00

It's hard to deny it: the President had a good political week last week. He signed the health care bill, reached an agreement with Russia on nuclear nonproliferation, and won a PR victory by visiting our troops in Afghanistan, unannounced. Seems like a perfect time for the President to build some political capital, prove to the public that he is listening (after suggesting otherwise for the past year) and shelve his ultra-partisan legislative agenda unless he garners significant Republican support. That's too logical for Washington. Rather, the President is going to take his waning political capital stock and double-down.

A senior Democratic official said the push was a textbook case of taking advantage of political momentum as the campaign season begins. Republicans are "on the defensive," the official said, "and as long as they're not cooperating, we ought to keep them there." - WSJ 3/30/10

On Thursday, the president challenged Republicans who planned to campaign on repealing his health-care bill with, "Go for it." Two days later, he made 15 senior appointments without Senate consent, including a union lawyer whose nomination had been blocked by a filibuster. - WSJ 3/25/10

For someone who came into office as the "first post-partisan" President, he's been anything but that. According to Rasmussen, "Only 28% now say the president is governing on a bipartisan basis". Proving time-and-again his unwillingness to work with Republicans and an uncanny knack for revising the historical record on Republican participation / ideas throughout the legislative process.

His objective is clear: one of the few ways Democrats can avoid a shellacking in November is to make sure their base is energized. Given the partisan rancor this country is enveloped in, what better way to work towards this goal than lambasting Republicans? The only problem is, there are segments of the President's electoral voting bloc from 2008 that are net sellers, not buyers, of his first 15 months.

For instance, a study released by Pew Research in February about the Millennial generation (those aged 18-30) pointed out the following:

Politically, Millennials were among Barack Obama's strongest supporters in 2008, backing him for president by more than a two-to-one ratio (66% to 32%) while older adults were giving just 50% of their votes to the Democratic nominee. This was the largest disparity between younger and older voters recorded in four decades of modern election day exit polling. Moreover, after decades of low voter participation by the young, the turnout gap in 2008 between voters under and over the age of 30 was the smallest it had been since 18- to 20- year-olds were given the right to vote in 1972.

But the political enthusiasms of Millennials have since cooled —for Obama and his message of change, for the Democratic Party and, quite possibly, for politics itself. About half of Millennials say the president has failed to change the way Washington works, which had been the central promise of his candidacy. Of those who say this, three-in-ten blame Obama himself, while more than half blame his political opponents and special interests.

To be sure, Millennials remain the most likely of any generation to self-identify as liberals; they are less supportive than their elders of an assertive national security policy and more supportive of a progressive domestic social agenda. They are still more likely than any other age group to identify as Democrats. Yet by early 2010, their support for Obama and the Democrats had receded, as evidenced both by survey data and by their low level of participation in recent off-year and special elections.

The infatuation of young voters with Obama and his "Rock Star" personality shouldn't come as a surprise, especially if you read more about Millennials and what they believe. It also reminds me of the classic Churchill quote. The question is: can Obama invigorate his supporters when he's not no the ticket? Judging by this chart, he may have a difficult time.

To be fair, this is only one segment of his voting bloc, but it did represent roughly 20% of total votes, which is significant, and up from 17% in 2004, or a 17.5% increase in turnout within this single demographic.

While November is a universe away, it will be interesting to see how much of a bump this past week gives Obama (and Democrats) and how sustainable it is. Voter fatigue should be a real concern for Democrats, particularly given the amount of energy spent since 2006 to get where they are. If the generic ballot remains within its recent range (Republicans +6-9), the enthusiasm gap remains wide, and Independents continue to prefer Republican candidates, pandering to his base and not engaging the other team could be a losing strategy for the President.

How to create jobs...

2010-03-25T13:02:00.000-07:00

Good article in today's USA Today about a new Kia plant in West Point, GA. Its Kia's first North American manufacturing plant and is it any surprise that they chose a right-to-work state and a state government that proved it was on the side of business, and not against it? What did Georgia do? "State and local officials made a huge investment to get Kia — local, state and federal tax breaks, incentives, even a new exit off Interstate 85. People here say that investment is paying off." The result? Over 1,200 jobs were created, with another 1,200 on the way and it has turned a struggling community into a prosperous one. "Sales and property tax receipts are going up, jobs are being created, and there's a sense of unbridled optimism here."

Note how sales taxes are increasing after taxes were cut...

Kia breathes life into old Georgia textile mill town

By Larry Copeland, USA TODAY

WEST POINT, Ga. — This old textile mill town of 3,500 along the Alabama border 80 miles southwest of Atlanta is dealing with a problem it hasn't had in ages: Downtown is booming so much it's often hard to find a parking spot.

"It's a problem we don't mind," says Mayor Drew Ferguson, pointing out business after business that have opened recently, 24 in the past 20 months. "It's amazing, the economic viability of downtown."

At a time when once-viable manufacturing communities across the USA are struggling to hold on, West Point — which flirted with obsolescence after the textile mills moved abroad — is beginning to prosper once again. Sales and property tax receipts are going up, jobs are being created, and there's a sense of unbridled optimism here.

The excitement is being driven by the recent opening of Kia Motors' first North American manufacturing plant, which began building the Sorento here last fall. In an area that has been staggering since the textile mills began moving out 20 years ago, the Kia plant is generating enormous enthusiasm. Kia says 43,000 people applied for 1,200 jobs on the first shift; it's now sorting through 31,000 applications for 1,200 second-shift jobs.

State and local officials made a huge investment to get Kia — local, state and federal tax breaks, incentives, even a new exit off Interstate 85. People here say that investment is paying off.

"When I first came here, there were, like, tumbleweeds rolling around downtown," says Ruthanne Williams, owner of the Irish Bred Pub downtown. She and her husband, Trent Williams, poured their life's savings into the restaurant and bar, betting that Kia would attract enough business for them to succeed in a location where several restaurants had failed before they bought the place.

"We definitely came to West Point, aka Kiaville, because of the plant," she says. "And it's been a very good decision. We believe in this town. We believe in this community. And we believe in Kia."

Outsize economic impact

Researchers at Georgia Tech estimate that Kia will generate 20,000 new jobs in a nine-county area of western Georgia and eastern Alabama by 2012, generating an annual economic impact in Georgia alone of $4 billion a year.

That's a new heartbeat for West Point.

The city was once home to textile giant WestPoint Stevens, one of the nation's top producers of towels with thousands of employees in this area in the 1980s. Competition from Asian and South American manufacturers, outdated plants and a hostile takeover soon led to the closing of plants in this area and around the South.

This community lost about 16,000 jobs over the past 20 years, Ferguson says. Just since 2001, Troup County has lost more than 5,000 jobs, a 15% decrease, according to the Georgia Department of Labor. Most of those jobs were in manufacturing, primarily in textiles.

"After the mills left, you could ride through the middle of West Point on a Thursday or Friday afternoon and sometimes you wouldn't see a single car parked," says Griggs Zachry, 70, owner of Zachry Construction and secretary of the West Point Development Authority. "It was absolutely heartbreaking."

Zachry says the rebirth of West Point has been slowed by the recession. "It's been a little slow; because the economy is so bad, nobody can get any money."

Many workers not local

Another dark spot on West Point's bright horizon: Many of the new jobs are going to people outside the county, including to Alabamians.

Troup County's unemployment rate in January was 13.4%, making it the 35th highest of Georgia's 159 counties. State Labor Commissioner Michael Thurmond, who calls this area "the epicenter" of economic activity in Georgia, says success is "not without challenges. Not everyone will benefit unless they are educated, skilled or trainable."

Many of the Kia workers come from Alabama, which has long had a workforce of skilled autoworkers. The state has three automobile plants: a Mercedes-Benz plant in production in Vance since 1997; a Honda plant in Lincoln since 2001, and a Hyundai plant in Montgomery since 2004.

Western Georgia and the eastern Alabama communities just across the Chattahoochee River — such as Lanett, Valley and Shawmut — have long been closely linked, so Alabama is seeing a boom, too: About half the 20 or so new automotive suppliers in the area are there.

Residents here say the population in West Point is growing.

"I have been here 19 years, and now, for the first time, I walk down the street and don't recognize people," says Doug Shumate, owner of CopperMoon, a maker of exterior landscape lighting for high-end homes, and chairman of West Point 2100 Foundation, a non-profit group that buys and refurbishes old buildings.

There is a significant construction boom, concentrated mostly in Alabama. The Greater Valley Group, one of the area's largest development companies, has $195 million in residential, retail and commercial construction underway, spokeswoman Jeanne Charbonneau says. "To date, everything we've built is within 7 miles of the new Kia plant," she says.

Ferguson says West Point is positioned to leverage its good fortune to revitalize neighborhoods that have languished in disrepair for years. He says his city is acutely aware of how strong its position is compared with many former manufacturing towns.

"We have a huge sense of our place in history," Ferguson says. "We're so empathetic to what a lot of other communities in our country are going through. We are very thankful — and very aware of the opportunities that lie in front of us."

(c) USA TODAY

Buh-bye Keynes...

2010-03-24T10:47:00.000-07:00

C/O Fed Up USA...

This chart takes the cake. It explains the jobless recoveries of the 00's, the lack of the "multiplier effect", sovereign debt crises, currency debasements, etc. It essentially shows the marginal impact to GDP from the infusion of $1 of additional debt. "In the USA by the end of 2009, each $1 of debt subtracted 45 cents from GDP!"

The race to the bottom...(of the polls)

2010-03-23T08:40:00.000-07:00

Good polling data from Stu Rothenberg...(Note: it's unclear whether "registered" voters or "likely" voters were used. The latter has proven to be more accurate.)

For Democrats, This Isn’t Simply Another Chicken Little Story

By Stu Rothenberg

For Democrats, the sky is falling, according to two national polls, one conducted by Peter Hart and Bill McInturff for NBC News/Wall Street Journal and the other by OnMessage Inc. for the Republican National Committee.

The results of the two surveys are very much in sync and present an increasingly disturbing picture for Democrats.

OnMessage’s March 9-11 survey found President Barack Obama’s job rating at 49 percent approve/47 percent disapprove, while the Hart/McInturff survey (March 11, 13-14) found it at 48 percent approve/47 percent disapprove.

Both found far more Americans believing the country was headed off on the wrong track (66 percent in OnMessage and 59 percent in Hart/McInturff) than in the right direction, and both found the once strong Democratic advantage in the generic ballot, which measures how people plan to vote in November (OnMessage) or which party they would like to control Congress after the next election (Hart/McInturff), has narrowed or disappeared.

The Hart/McInturff poll shows only 35 percent of respondents saying the February 2009 stimulus legislation was a good idea, while 42 percent said it was a bad idea.

Even worse for Democrats, by 61 percent to 30 percent, Americans now say it is better to have different parties controlling Congress and the presidency rather than to have one party controlling both branches — a significant increase in the “different parties” response compared to the October 2008 Hart/McInturff poll.

On specific issues, Democratic numbers have weakened dramatically, according to NBC News/Wall Street Journal polling

When asked which party would do a better job dealing with health care, the Democrats’ 31-point advantage in July 2008 has slipped to a mere 9 points now. The party’s 16-point advantage in July 2008 on dealing with the economy has evaporated completely, and the parties are now even. And on taxes, the Democrats’ 1-point advantage in July 2008 has turned into an 11-point GOP advantage.

No matter what happens with the health care bill (and it may well have been passed by the House by the time you read this), the issue has severely damaged Democratic prospects for the fall.

Not surprisingly, the OnMessage survey shows Democratic support for the bill and Republican opposition, but it also shows 2-to-1 opposition from voters who identify themselves as undecided about which party they plan to support in the midterm elections. In question after question in the OnMessage poll, these “generic undecided voters” look like very much like Republican voters.

After scouring dozens of polls over the past couple of weeks, I have found only a few poll questions that can give Democrats much hope for November.

First, the Republican brand still stinks. Voters aren’t clamoring for Republicans to run anything in Washington, D.C., and polls continue to show that Americans still think that former President George W. Bush bears more of the responsibility for the nation’s economic pain than anyone else.

Unfortunately for Democrats, their own brand has fallen like a rock.

In April, almost a year ago, the Hart/McInturff poll found 45 percent of Americans with a positive view of the Democratic Party and 34 percent with a negative view. In the most recent Hart/McInturff survey, the Democratic Party’s positives have sunk to 37 percent and its negatives have risen to 43 percent. Yes, those numbers are slightly better than the GOP’s (31 percent positive/43 percent negative), but not enough to help Democrats in the fall.

As for Bush, he won’t be on the ballot or in the public’s consciousness in November, so Democrats will have to spend a great deal of time (and money) trying to make the midterms a referendum on the former president rather than on the sitting president. The chances that most Democratic candidates will succeed in that effort are exceedingly small.

Privately, many Democratic insiders acknowledge that the party’s outlook is increasingly bleak for the fall. Health care reform, once seen as a party strength, has turned into a significant liability, and few think the economy will turn around far enough or fast enough to help Democratic candidates in the midterm elections.

Even before this election cycle started, midterm election turnout trends put Democrats at something of a disadvantage. But now, every poll that I have seen suggests that Republicans are dramatically more motivated than are Democrats, which means a more conservative and Republican electorate this year than in 2008, as well as much-improved Republican prospects.

I have been hesitant — and I remain hesitant — to get too far in front of the election cycle, since circumstances can change and Democrats could well have an important financial advantage in the key post-Labor Day time period. But let’s be clear about what is developing: Obama and the Democratic Congressional leadership have dug themselves into a deep and dangerous political hole, and the only question right now seems to be the severity of the drubbing.

As one smart Democratic strategist told me recently, “All of the elements are in place for a disaster like 1994. But it could be even worse.”

Quick hits (health care version)...

2010-03-19T10:42:00.000-07:00

Attorneys General in South Carolina and Florida Set to Sue on Health Care Reform

South Carolina Attorney General Henry McMaster says he and Florida Attorney General Bill McCollum are ready to file a federal lawsuit if health care reform legislation passes.

The U.S. House plans to vote on the plan Sunday.

McMaster said Friday that he expects attorneys general to join the lawsuit. He and other GOP counterparts have denounced the legislation.

Democratic Rep. DeFazio Switches Vote to 'No' on Health Care Bill

Democratic Rep. John Boccieri of Ohio is switching his vote to "yes" on President Obama's health care overhaul, bringing House Speaker Nancy Pelosi just one vote shy of the 216 needed for passage .
The vote tally on health care reform is starting to look like the Dow.

Just when House Speaker Nancy Pelosi seemed to be one vote shy of the number needed for health care reform to pass, a Democrat who voted for the bill last year says he's switching his vote to no.

The opposition from Rep. Peter DeFazio, D-Ore., dials back the number of House members leaning toward voting yes to 214, and the number leaning toward voting no to 217.

Pelosi needs 216 for the bill to pass.

Democrats Gain Support as They Move on Health Vote

March 19 (Bloomberg) -- U.S. House Democrats, who cleared a big hurdle in their effort to overhaul the health-care system by producing compromise legislation, are picking up fresh support for a showdown vote this weekend.

Democrats need about six more votes from House members to pass the 10-year, $940 billion bill, Obama administration officials said today. President Barack Obama and Democratic leaders aim to sway some in a pool of 14 or 15 undecided lawmakers to get to the 216 votes needed to pass the measure, according to the officials, who spoke on condition of anonymity.

“We are going to have the votes, when the roll is called,” House Majority Leader Steny Hoyer told reporters today. A vote is scheduled for March 21, leaders said.

Caterpillar: Health care bill would cost it $100M

Dow Jones Newswires Caterpillar Inc. said the health-care overhaul legislation being considered by the U.S. House of Representatives would increase the company's health-care costs by more than $100 million in the first year alone.

In a letter Thursday to House Speaker Nancy Pelosi (D-Calif.) and House Republican Leader John Boehner of Ohio, Caterpillar urged lawmakers to vote against the plan "because of the substantial cost burdens it would place on our shareholders, employees and retirees."

Caterpillar, the world's largest construction machinery manufacturer by sales, said it's particularly opposed to provisions in the bill that would expand Medicare taxes and mandate insurance coverage. The legislation would require nearly all companies to provide health insurance for their employees or face large fines.

The Peoria-based company said these provisions would increase its insurance costs by at least 20 percent, or more than $100 million, just in the first year of the health-care overhaul program.

"We can ill-afford cost increases that place us at a disadvantage versus our global competitors," said the letter signed by Gregory Folley, vice president and chief human resources officer of Caterpillar. "We are disappointed that efforts at reform have not addressed the cost concerns we've raised throughout the year."

Quick hit...

2010-03-18T08:20:00.000-07:00

Stephen Lynch [a democrat] calls health care vote plan ‘disingenuous’

"Even one of House Speaker Nancy Pelosi’s floor whips, U.S. Rep. Stephen Lynch, says a proposed parliamentary move to pass health-care reform would be “disingenuous” and harm the credibility of Congress.

In a sign of how tough it’s been for Pelosi to round up votes for the massive bill, Lynch - a South Boston Democrat who supported a House reform package last year - said he’ll probably vote against a key Senate version of the legislation, unless unexpected major changes are made soon.

Lynch, who serves as one of Pelosi’s key vote counters, said he also can’t support a proposed “deem and pass” procedure that would allow Democrats to vote to strip out controversial portions of the Senate bill and then “deem” that the entire package has passed without a second, direct vote.

“It’s disingenuous,” said Lynch, who considers unfair a Senate provision to tack a surcharge on higher-end health plans. “It would really call into question the credibility of the House.”

Other Democrats have countered that the “deem and pass” tactic has been employed before, including when Republicans were in the majority in Congress."

This is the key...

2010-03-17T17:58:00.000-07:00

On the surface, "Deem and Pass" (AKA "The Slaughter Rule" -- named after the Chairwoman of the House Rules Committee)---the method the democrats are proposing to pass the health care bill---might be unconstituional, but I'm no lawyer. That said, I can read and the Constituion appears to be pretty cut-and-dry that "[v]otes of both Houses shall be determined by Yeas and Nays"...

Article I, Section 7 of the U.S. Constitution states: "Every Bill which shall have passed the House of Representatives and the Senate, shall, before it become a Law, be presented to the President of the United States; If he approve he shall sign it, but if not he shall return it, with his Objections to that House in which it shall have originated, who shall enter the Objections at large on their Journal, and proceed to reconsider it. If after such Reconsideration two thirds of that House shall agree to pass the Bill, it shall be sent, together with the Objections, to the other House, by which it shall likewise be reconsidered, and if approved by two thirds of that House, it shall become a Law. But in all such Cases the Votes of both Houses shall be determined by Yeas and Nays, and the Names of the Persons voting for and against the Bill shall be entered on the Journal of each House respectively.”

Put simply,

"...instead of House members casting their votes on the Senate version of the health-care bill, the House would vote on a package of “fixes” made to those parts of the Senate bill to which House members object...Under the House’s “self-executing rule” provision, if the lawmakers pass a rule that says passing the “fixes” is the same as passing the actual bill -- then the House would magically "deem" the health-care bill to be “passed.” The "rule" itself would be sponsored by the chairman of the House Rules Committtee, Rep. Louise Slaughter (D-N.Y.)."

Source: http://www.cnsnews.com/news/article/62939

Does the math work...?

2010-03-17T14:41:00.000-07:00

The question remains: do the democrats have enough votes to pass health care?

According to most reports, the health care vote is set to take pace sometime on Friday (or Saturday). As it stands today, it appears the democrats do not have enough votes to carry-the-day; otherwise, as logic goes, they would have already voted. Rumors are percolating that another "deal" may have been struck between the Obama Administration (more accurately, the Department of the Interior) and two California Congressman (Cardoza and Costa, who both voted 'yes' previously) at the behest of Boxer and Feinstein. (http://nrcc.org/blog/blogitem.aspx?id=261)

ABC News took a stab at estimating where the vote stood yesterday (http://blogs.abcnews.com/thenote/2010/03/do-pelosi-and-the-democrats-have-the-health-care-votes-heres-the-math-.html) and came up with the following conclusion:

“If every sitting House Democrat who voted for the health care bill in November, voted for it again this weekend, Nancy Pelosi would have the 216 votes she needs to pass it.

However, because of resistance to the Senate bill overall and (for several anti-abortion rights Democrats) specifically its abortion language, Democrats know they will not be able to get all their previous YES votes to vote YES again.

So, the game becomes how many previous YES votes can Democratic leaders afford to lose? The answer to that question is another question, of course.

How many previous NO votes can Democratic leaders definitively flip to YES?

You will see below that there is no margin for error. And this remains somewhat fluid as Pelosi searches for her final handful of votes.”

There are a handful of "targets" (ie, those representatives who will decide the outcome). See below.

Assuming the democrats that voted 'yes' previously vote 'yes' this time around, the democrats will come up five votes shy of the requisite 218 votes.

Obviously, this is very fluid and the numbers are certain to change but this helps to explain why Pelosi hasn't held the vote, Obama delayed his trip to Australia, and 'deals' are being made.