Monday, July 16, 2012

On the aftermath of the Obamacare decision

The Supreme Court recently released it's decision* on the Patient Protection and Affordable Care Act (aka Obamacare). In the wake of the decision, which I'm not really discussing here, there has been a lot of spin that's been difficult to sort through. Here are my thoughts on what's being said and specifically what's accurate and what is not
  1. First of all, there's been a lot of discussion about whether or not the "shared responsibility payment" paid by people who can afford health insurance but choose not to buy it is a tax or a penalty. Reading the decision the answer is pretty simple. Basically it is a tax but it's not a tax because it's a penalty. OK...maybe it's not that simple. Chief Justice Roberts basically says that it's a tax in the eyes of the Constitution because "it produces at least some revenue for the Government." So any fee, penalty, tax, royalty etc... that produces some revenue is a "Constitutional tax."  But within the law, Congress called the payment a "penalty" instead of a tax. Within laws passed by Congress "tax" has a specific meaning different from a fee, penalty, etc...and, is treated differently than these others things. For example, the Anti-Injunction Act applies only to a tax. In this case, the Anti-Injunction Act does not apply because it is not a tax - as defined by Congress. That it is not a tax as defined by Congress was a unanimous decision, but that it is a tax as defined by the Constitution was only 5-4. So the confusion comes from one word -tax - being used for two different and distinct but overlapping meanings (similar to the way the word "man" can be used to refer to all people or specifically to men or to an individual male). To more clearly state what I wrote before:  Basically it is a "Constitutional tax" but it's not a "legislative tax" because it's a "legislative penalty."
  2. Some pundits have accused Obama of lying about Obamacare's status as a tax. Back in 2009, Obama, in an interview with George Stephanopoulos said pretty emphatically that it was not a tax. But then he had the Solicitor General argue that it was a tax and was thus a constitutional use of Congress' taxing power. Both of those statements are true, but they are not contradictory. Obama was arguing that it was a "constitutional tax" and not a "legislative tax," which the Supreme Court agreed with in it's entirety.  And, the Solicitor General argued that it was not a tax for the purpose of the Anti-Injunction Act, with which the Court also agreed.  So when he told George Stephanopoulos that it wasn't a tax that wasn't a lie, as long as he was talking about it legislatively.  And not only is that the more charitable position to take, it is the more logical one. Calling the penalty a tax under the Constitution's taxing power is a bit of an esoteric statement, fitting for a courtroom but not every day speech. Colloquially people don't refer to every fee or penalty as a tax. And really this isn't a tax in the classic sense, because it isn't intended to raise money. The purpose is to modify behavior by making it more expensive to live without insurance. Ideally, from the government's standpoint, no one would pay the penalty, because everyone who could afford insurance would buy it. If your goal is to have no one pay it, then it isn't meant to generate revenue and it isn't really a "tax" in the colloquial use of the word.
  3. Others, including Romney, have called Obama a liar because he promised he wouldn't raise taxes on the middle class. Politifact does call this a promise broken, but they're taking a very expansive and literal view of that promise - one that includes increased taxes on cigarettes and an increased tax on tanning services. So if you take that view, then the outcome of the Supreme Court decision calling the payment a 'tax' is irrelevant since he'd already broken it and if you take the view that Obama was only referring to income taxes on people making less than $250,000 it's also irrelevant since this isn't an income tax. He was either already a liar (or he had already broken his promise) or he isn't one now. This decision didn't transform him into a liar. It's also worth asking if breaking a promise is the same as lying. 
  4. Meanwhile, some conservatives are saying they lost the battle, but won the war. George Will called it a "substantial victory" and Charles Krauthammer celebrates that " the Commerce Clause is reined in." But I'm unclear on what behavior they think is stopped. The Obama administration wasn't arguing that the Commerce Clause gives Congress unfettered power. Neither is anyone else. Their point has always been that this was an exceptional situation because the need for healthcare is "unpredictable and involuntary." Much was made of the fact that no one could find a good precedent, beyond a gun purchase mandate from the 18th Century, for this law; and Justice Scalia went to a ridiculous example - having the government mandate the purchase of broccoli [which fails the limiting principle Verrilli gave because purchases of broccoli are never unpredictable or involuntary] - perhaps because he couldn't think of a realistic possible action that the government might take. Even then, Verilli agreed that no, the government can't make you buy brocoli. So everyone was in agreement on that. The Obama administration was saying that in general Congress can't compel you to enter a marketplace, but that health care is a unique exception, and the opposition said that health care wasn't unique, with which the Supreme Court agreed. But that isn't much of a gap between the two sides, making the decision pretty narrow. And I don't know what other laws - current, proposed or existing only as a twinkle in a young legislator's eye - George Will thinks has been stopped by this decision. I don't think there is one. 
  5. Romney's position has been harder to understand, but eventually correct. First, his spokesman said that Romney thought that it was a penalty (which is correct) but that it wasn't a tax (with which the entire Supreme Court disagrees). Romney later said that he would go with the ruling of the Supreme Court, so it was a tax (which is correct). Romney also said that in the law he signed in Massachusetts the mandate wasn't a tax, which is also probably true depending on Massachusetts law. So, it appears that Romney's final position is correct. The federal "shared responsibility payment" is technically a tax, but not in the way that most people actually use the word. It is only a tax as defined by the Constitution in a way that is mostly unused outside of Constitutional scholars. It is primarily a penalty. The Massachusetts law is also a penalty and isn't a "tax" as defined by the Constitution because the Constitution isn't relevant to state taxing. But it may be a tax under a some other definition within state law of which I am unaware.
  6. Paul Ryan, to name one person, has criticized Obama for calling the payment a "penalty" instead of a tax because had it been called a tax, it would never have passed Congress. We can't really know if that is true, but if it is, it says several things. First, it says that Congress isn't using the right criteria  when voting. If calling something a penalty instead of a tax is all it takes to change the outcome of a vote, when the substance of the bill being voted on doesn't change at all (except for how it's treated by the Anti-Injunction Act), then it would appear that Congress is too concerned with syntax. It also appears that Ryan is accusing the President of tricking Congress into voting for the law because "he says one thing to get this past Congress and then another to get it past the Supreme Court" which also doesn't speak well of Congress. Are they really so easily fooled?  The answer to all of this is likely that, yes, Congress is too concerned with syntax. But making a 99.999% trivial change to a law, like what to call a payment, that changes it from dead to passed is not hypocrisy or lying. It's good legislating and good leadership and good politics. So that may be why Ryan finds it "frustrating".
  7. When it appeared that the ACA was going to be overturned by the Supreme Court, there was much hand-wringing about how Obama, a former constitutional law professor, could have a law he championed be overturned as unconstitutional. For example, Chris Wallace asked " How damaging to the President, if in June the Court were to rule that this former Constitutional law professor/President was on the wrong side of the Constitution both on the Arizona law and on Obamacare?" And Haley Barbour said it would be "interesting" for a former constitutional law professor's "signature law" to be invalidated because it's unconstitutional. The implication being that the President should know what the outcome of the Court case will be and if he doesn't it's probably because he wasn't much of a Constitutional scholar. Even before the case was decided, I thought it was ridiculous. The Chief Justice of the Supreme Court often holds an opinion that is different from the Court's majority, but no one accuses him or the other Justices of not understanding the Constitution (well, maybe Thomas). How the Court will decide a case is something of a crap shoot, so no one can really be belittled for getting it wrong. Heck, even when they're unanimous they're often overturning a decision by a lower court judge who is probably pretty well versed in the law themselves. So the whole premise is silly. But, what I haven't heard is Wallace or Barbour say "Wow, I guess the President really does understand the Constitution - better than even I do," which while unproven by the events in June, would at least be consistent with their earlier statements. 


    1. thank you! this is the best attempt to sort though the spin and logic on this topic that I have come across. really enjoyed reading this.

      the tax/penalty question brings my mind to automated speed cameras, because there is also an ongoing debate if they are a tax or a penalty. Politicians say it is to reduce speeding, but certainly the company contracting to provide the cameras needs to make a profit. The goal can't be to set a camera and not have it catch anybody. They have floated the idea of a universal deterrent, where you can expect to get caught anywhere, anytime. That doesn't seem to mesh with the business model. And while I like the idea of nobody ever speeding, I am a bit uncomfortable with that level of paranoia. Are we going to be sold the universal deterrent concept in other areas of law enforcement?

      The intersection of behavior modification and tax penalties is a growing area of discussion. I came across articles recently about how AMEX will data-mine shopping habits to determine when they should cut your line of credit (thus damaging your credit rating, even if it was good). The idea is that you can fairly accurately predict future behavior by looking at what people buy, and where they buy it. If you are shopping at places where other people who don't pay their bills shop, or buying certain products, that makes you a bad risk, thus they should limit that risk proactively. It would seem to me that information law enforcement is becoming increasingly automated. For ex. if you get caught by a speed camera in a rental car, the rental company will pay the camera bill automatically by billing your credit card, so you are automatically guilty without any opportunity for trial or plea. what if someone borrowed your rental car? other areas of law enforcement could be similarly automated. Information like shopping behavior, travel patterns, cell phone use patterns, etc. all that data is being collected and could be combined, data-mined, and used to predict future behavior. We can then tax or penalize people based on future risk, based on past behavior we didn't even know was tracked. If it's profitable, it will probably happen. If a private company or bank charges differently based on risk, or with an eye for behavior modification, is that a tax or a penalty. What if that company is filling a roll once filled by government.

      1. I am very sensitive at the moment about the idea of banks charging interest, based on risk, when it is now revealed that they were tampering with LIBOR interest rates. so basically they would collude to set the interest rates, and yet they are making investment money based on their "best guess" of what the rates will be. This way they can guarantee that they make money on investments that are worth nothing but sold at profit, like mortgages that are designed to explode, packaged into AAA-rated investments. This is probably still going on. It has been calculated the profit on LIBOR manipulation was equivalent to five times the entire global GDP, and that is JUST the LIBOR manipulation, not the profit on toxic assets. So Banks will made profits by placing bets on insider information, such as camouflaged toxic assets, fabricated borrowing costs, who or what will be a bad bet based on data-mining consumer information, etc. When those bets go bad, the execs get paid bonuses, and it's the public who will get fleeced, and bails them out to boot.

    2. if you get caught by a speed camera in a rental car, the rental company will pay the camera bill automatically by billing your credit card, so you are automatically guilty without any opportunity for trial or plea. what if someone borrowed your rental car?

      Or what if the machine made an error. That happened to me once. They knew it, but didn't dismiss my ticket until I showed up in court, then they did so instantly. I never said a word and got mine dismissed. That's an excellent question about traffic cameras.

      I support them, but they should be designed to NOT generate revenue. $5 tickets and points leading to a loss of license should be the enforcement mechanism. $150 tickets are onerous and serve as a regressive tax to boot.