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Friday June 23, 2017 @ 12:11:58 AM mt

Senate Republicans Offer a Bill to Preserve Expand ObamaCare



Yesterday, I posted Five Questions I Will Use to Evaluate the Phantom Senate Health Care Bill. The phantom bill took corporeal form today when Senate Republicans released the text of the Better Care Reconciliation Act.

So how does the Senate bill fare with regard to my five questions?

1. Would it repeal the parts of ObamaCarespecifically,community ratingthat preclude secure access to health care by causing coverage to becomeworse for the sickandthe Exchanges to collapse?

No.The Senate bill would preserve ObamaCares community-rating price controls. To be fair, it would modify them. ObamaCare forbids premiums for 64-year-olds to be more than three times premiums for 18-year-olds. The Senate bill would allow premiums for the older cohort to be up to five times those for the younger cohort.But these age rating restrictionsare the least binding part of ObamaCares community-rating price controls. Those price controls would therefore continue to wreak havoc in the individual market. The Senate bill would also preserve nearly all of ObamaCares other insurance regulations.

2. Would itmake health care more affordable, or just throw subsidies at unaffordable care?

The Senate bill, like ObamaCare, would simply throw taxpayer dollars at unaffordable care, rather than make health care more affordable.

Making health care more affordable means driving down health care prices. Recent experiments have shown that cost-conscious consumers do indeed push providers to cut prices. (See below graph. Source.)

If you want to see that level of price reductions, you need something along the lines of large health savings accounts.

The Senate bill would make only minor adjustments to tax-free HSAs that would not deliver lower prices.

3. Would it actually sunset the Medicaid expansion, orkeep the expansion alivelong enough for a future Democratic Congress to rescue it?

The bill would keep it alive so ObamaCare supporters can rescind the repeal.

To be fair, the Senate bill would forbid the 19 states that havent implemented ObamaCares Medicaid expansion from doing so. As explained below, however, the bill would expand a different entitlementObamaCares Exchange subsidiesto that population.

The bill would also repeal the Medicaid expansion in 2024. Yet three new Congresses would take their seats between passage of the bill and when it would repeal the Medicaid expansion. We may even get a new president by then. It is almost guaranteed that one of those Congresses (if not all three) will be more supportive of the Medicaid expansion than the current Congress. Such a Congress could rescind that before it ever happens, as if it never happened.

Senate Republicans rigged this Medicaid-expansion repeal never to take effect.

4. Tax cuts are almost irrelevanthow much of ObamaCaresspendingwould it repeal?

This one is hard to answer without an official score from the Congressional Budget Officeor even with one. Senate Republicans played budget games that hide how much of ObamaCares spending they are keeping.

Senate Republicans required the CBO to compare the cost of the bill to projections of Exchange enrollment and spending that everyone agrees are inflated. So the forthcoming CBO score will make it look like the Senate bill increases the uninsured more than it actually does. Put differently, the CBO score will count some people as losing coverage under the Senate bill even though they werent going to have coverage anyway. By the same token, this gimmick will make the Senate bill look like it cuts ObamaCare spending more than it does. It requires the CBO to score the Senate bill as eliminating ObamaCare outlays that were never going to happen.The sneaky part is that this budget gimmick then allows Senate Republicans to apply those phantom cuts either to new spending or deficit reduction.

One way the Senate bill applies those phantom cuts to new spending is by expanding ObamaCare to an additional2.6 million Americans.Thirty-one states and D.C. have implemented ObamaCares Medicaid expansion. The Kaiser Family Foundation estimates that inthe 19 states that have not expanded Medicaid, there are 2.6 million able-bodied adults who earn too much to qualify for Medicaid but less than 100 percent of the federal poverty level, and thus not enough to receive a premium assistance tax credit toward the purchase of an Exchange plan. (We call them tax credits, but they are mostly outlays.) In 2020, the Senate bill would open eligibility for the tax credits to everyone below 100 percent of the federal poverty level in states that do not implement the expansion. This would expand ObamaCare to another 2.6 million people. In effect, it is Medicaid expansion by another meansand it effectively snubs GOP officials in the 19 states that did the right thing (reduced federal deficits, etc.) by not expanding Medicaid.

The Senate bill would also fund ObamaCares cost-sharing subsidies, something the laws Democratic authors never did. That, too, would expand ObamaCare beyond what a Democratic Congress created.

So even if the bills spending cuts were real (theyre not; see above), we still wouldnt really know how much the Senate bill reduces actual federal outlays. All we know for sure is that Senate Republicans want to hide how much ObamaCare spending they are preserving, and that the CBO score will likely overstate the bills deficit reduction.

5. If it leaves major elements of ObamaCare in place, would it lead voters to blame the ongoing failure of those provisions on (supposed) free-market reforms?

Yes.

Supporters of the Senate bill are calling it a huge win for conservative governance.

Yet the bill does almost nothing to address the fundamental flaws and instability in ObamaCares architecture. Community rating and other provisions of the law will continue to increase premiums, degrade the quality of coverage, and destabilize insurance markets. ObamaCare supporters, including those who also support a single-payer system, will be quick to blame ObamaCares failures on the conservative, free-market ideology that supposedly animates the Senate bill. Such claims will be nonsense. But the narrative will be difficult to combat. The Senate bill could therefore set back the cause of free-market health care reform by decadesyet another feature it shares with ObamaCare.

The Senate bill is not even a step in the right direction. If this is the choice facing congressional Republicans, it would be better if they did nothing. Consumers would continue to struggle under ObamaCares regulations, but those costs would focus attention on their source. The lines of accountability would be clearer if Republicans signed off on legislation that seems designed to rescue ObamaCare rather than repeal and replace it.

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Friday June 23, 2017 @ 12:11:58 AM mt

Californias Fishy Licensing Fees



One of the liberties protected by the Constitution is the right to do business in other states, on the same terms as companies based in those states. That right is enshrined in the Privileges and Immunities Clause of Article IV, section 2, one of the handful of individual rights that the Framers saw fit to safeguard even before the Bill of Rights was enacted. In fact, ensuring the opportunity to do business out-of-state on equal terms with a states residents was one of the principal motivations for holding the Constitutional Convention in the first place. But the U.S. Court of Appeals for the Ninth Circuit has condoned Californias violation of that right.

California enacted a set of commercial-fishing license fees that require nonresidents to pay several times more than residents. The system is explicitly discriminatory, harshly regressive, and intentionally protectionist. The Supreme Court and the Fourth Circuit, in substantively identical circumstances, have ruled these kinds of provisions to be impermissible: States must charge license fees equally to residents and nonresidents alike, or else bear the burden of justifying their discrimination (which California has made little real effort to do). But an en banc majority of the Ninth Circuit quite literally imposed the opposite rule. Not only did it uphold Californias discrimination, but it supported its holding with guesstimates of tax payments and rough calculations of economic costs that the state itself had never supplied. The result is conflict between two federal circuits and an open door for new methods of discrimination that the Constitution has always forbidden.

Now, a group of fishermen, with amicus support from Cato, is asking the Supreme Court to hear their case and strike down Californias differential commercial fishing license fees. Under the Ninth Circuits reasoning, everything California spends on fishery regulation is considered a subsidy to that industrya subsidy paid by resident taxpayers for which the state must be compensated. This framing ignores the fact that nonresident fishermen also pay California sales tax and California income tax for income derived from in-state activities (when their income is enough to qualify for taxation, which it often isnt) and directly contradicts controlling Supreme Court precedent. This dangerous rationale could otherwise be applied to any number of the nearly one-third of US occupations currently regulated by the states, and if unchecked could contribute significantly to creating just the sort of balkanized national economy that the Constitution was intended to prevent.

The fact of the matter is that California is attempting to protect local business interests at the expense of nonresidents and dress up its blatantly protectionist violation of the Privileges and Immunities Clause in reasonable-sounding language about fairness. The Supreme Court should grant certiorari and remind the Ninth Circuit that this sort of behavior is constitutionally unacceptable.

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Thursday June 22, 2017 @ 11:30:41 AM mt

More School Choice Less Crime



One of the original arguments for educating children in traditional public schools is that they are necessary for a stable democratic society. Indeed, an English parliamentary spokesman, W.A. Roebuck, argued that mass government education would improve national stability through a reduction in crime.

Public education advocates, such as Stand for Childrens Jonah Edelman and the American Federation for Teachers Randi Weingarten, still insist that children must be forced to attend government schools in order to preserve democratic values.

Theory

In principle, if families make schooling selections based purely on self-interest, they may harm others in society. For instance, parents may send their children to schools that only shape academic skills. As a result, children could miss out on imperative moral education and harm others in society through a higher proclivity for committing crimes in the future.

However, since families value the character of their children, they are likely to make schooling decisions based on institutions abilities to shape socially desirable skills such as morality and citizenship. Further, since school choice programs increase competitive pressures, we should expect the quality of character education to increase in the market for schooling. An increase in the quality of character education decreases the likelihood of criminal activity and therefore improves social order.

Evidence

There are only three studies causally linking school choice programs to criminal activity. Two studies examine the impacts of charter schools and one looks at the private school voucher program in Milwaukee. Each study finds that access to a school choice program substantially reduces the likelihood that a student will commit criminal activity later on in life.

Notably, Dobbie & Fryer (2015) find that winning a random lottery to attend a charter school in Harlem completely eliminates the likelihood of incarceration for males. In addition, they find that female charter school lottery winners are less than half as likely to report having a teen pregnancy.

Note: A box highlighted in green indicates that the study found statistically significant crime reduction.

According to the only causal studies that we have on the subject, school choice programs improve social order through substantial crime reduction. If public education advocates want to continue to clench onto the idea that traditional public schools are necessary for democracy, they ought to explain why the scientific evidence suggests the opposite.

Of course, these impacts play a significant role in shaping the lives of individual children. Perhaps more importantly, these findings indicate that voluntary schooling selections can create noteworthy benefits for third parties as well. If we truly wish to live in a safe and stable democratic society, we ought to allow parents to select the schooling institutions that best shape the citizenship skills of their own children.

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Thursday June 22, 2017 @ 11:30:41 AM mt

Even Sex Offenders Have Constitutional Rights



On Monday, the Supreme Court ruled that a North Carolina preventing sex offenders from accessing social media and other websites without any attempt to tailor restrictions to potential contact with minors violated the First Amendment. But restrictions on the freedom of speech arent the only unconstitutional deprivations sex offenders face.

In 1994, Minnesota passed what has become arguably the most aggressive and restrictive sex-offender civil-commitment statute in the country. The Minnesota Sex Offender Program (MSOP) provides for the indefinite civil commitment of sexually dangerous individuals, over and beyond whatever criminal sentence they may have already completed.

And while there is technically a system in place whereby committed individuals can petition for release or a loosening of their restrictions, in the more than 20 years that the MSOP has existed, only one person has ever been fully discharged (someone in the program for offenses committed as a minor, and he was only discharged after a court challenge). As Craig Bolte, one person committed in the MSOP, has testified, there is a distinct feeling that the only way to get out is to die.

The Supreme Court has held that states have the authority to commit individuals against their will outside the traditional criminal justice context, but only for the purpose of keeping genuinely dangerous people off the streets while undergoing rehabilitative treatment. Punishment and deterrence are legitimate goals exclusively of the criminal justice system, so any deprivation of liberty for either of those two purposes must follow only from that system, with all the procedural protections our Constitution requires.

What sets Minnesotas program apart from other schemes that have been upheld is that it doesnt provide for any sort of periodic assessment to determine who does or doesnt meet the requirements for discharge. By the states own admission, hundreds of civilly committed individuals have never received an assessment of their risk to the public, and hundreds more have received assessments only sporadically.

The MSOP is aware that at least some of the people in its custody satisfy statutory-discharge criteria, yet has taken no steps to determine who they are, let alone begin discharge proceedings. For these reasons, Kevin Karsjens and other similarly committed individuals have brought a federal class action challenging the MSOP as an irrational violation of their right to freedom from bodily restriction. They prevailed in the trial court, but the U.S. Court of Appeals for the Eighth Circuit reversed, stating that the plaintiffs have no liberty interest in freedom from physical restraintnot that their liberty interest must be balanced against the states interest in protecting the public from violence, but that for sex offenders, that liberty interest simply does not exist.

The plaintiffs now seek Supreme Court review. Cato, joined by the Reason Foundation, has filed an amicus brief in support of the committed individuals. The lack of periodic risk assessment and the punitive nature of the states policies represent an unconstitutional attempt to exact effectively criminal penalties on individuals who have not been provided the full procedural protections of criminal law.

The high court should intervene and repair the damage done by the unfettered confinement of sex offenders and restore the appropriate level of constitutional scrutiny to serious deprivations of liberty.

The Supreme Court will decide whether to take upKarsjens v. Piper when it returns from its summer recess.

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Thursday June 22, 2017 @ 11:30:41 AM mt

Three Lessons from the Tax Defeat in Kansas



Leftists dont have many reasons to be cheerful.

Global economic developments keep demonstrating (over and over again) that big government and high taxes are not a recipe for prosperity. That cant be very encouraging for them.

They also cant be very happy about the Obama presidency. Yes, he was one of them, and he was able to impose a lot of his agenda in his first two years. But that experiment with bigger government produced very dismal results. And it also was a political disaster for the left since Republicans won landslide elections in 2010 and 2014 (you could also argue that Trumps election in 2016 was a repudiation of Obama and the left, though I think it was more a rejection of the status quo).

But there is one piece of good news for my statist friends. The tax cuts in Kansas have been partially repealed. The New York Times is overjoyed by this development.

The Republican Legislature and much of Kansas has finally turned on Gov. Sam Brownback in his disastrous five-year experiment to prove the Republicans trickle down fantasy can work in real life that huge tax cuts magically result in economic growth and more, not less, revenue. state lawmakers who once abetted the Brownback budgeting folly passed a two-year, $1.2 billion tax increase this week to begin repairing the damage. It will take years for Kansas to recover.

And you wont be surprised to learn that Paul Krugman also is pleased.

Heres some of what he wrote in his NYT column.

there was an idea, a theory, behind the Kansas tax cuts: the claim that cutting taxes on the wealthy would produce explosive economic growth. It was a foolish theory, belied by decades of experience: remember the economic collapse that was supposed to follow the Clinton tax hikes, or the boom that was supposed to follow the Bush tax cuts? eventually the theorys failure was too much even for Republican legislators.

Another New York Times columnist did a victory dance as well.

The most momentous political news of the past weekwas the Kansas Legislatures decision to defy the governor and raise income taxes Kansas, under Gov. Sam Brownback, has come as close as weve ever gotten in the United States to conducting a perfect experiment in supply-side economics. The conservative governor, working with a conservative State Legislature, in the home state of the conservative Koch brothers, took office in 2011 vowing sharp cuts in taxes and state spending, except for education and promising that those policies would unleash boundless growth. The taxes were cut, and by a lot.

Brownbacks supply-side experiment was a flop, the author argues.

The cuts came. But the growth never did. As the rest of the country was growing at rates of just above 2 percent, Kansas grew at considerably slower rates, finally hitting just 0.2 percent in 2016. Revenues crashed. Spending was slashed, even on education The experiment has been a disaster. the Republican Kansas Legislature faced reality. Earlier this year it passed tax increases, which the governor vetoed. Last Tuesday, the legislators overrode the veto. Not only is it a tax increase its even a progressive tax increase! More than half of the Republicans in both houses voted for the increases.

If you read the articles, columns, and editorials in the New York Times, youll notice there isnt a lot of detail on what actually happened in the Sunflower State. Lots of rhetoric, but short on details.

So lets go to the Tax Foundation, which has a thorough review including this very helpful chart showing tax rates before the cuts, during the cuts, and what will now happen in future years (the article also notes that the new legislation repeals the exemption for small-business income).

We know that folks on the left are happy about tax cuts being reversed in Kansas. So what are conservatives and libertarians saying?

The Wall Street Journal opined on what really happened in the state.

national progressives are giddy. Their spin is that because the vote reverses Mr. Brownbacks tax cuts in a Republican state that Donald Trump carried by more than 20 points, Republicans everywhere should stop cutting taxes. The reality is more prosaicand politically cynical. At bottom the Kansas tax vote was as much about unions getting even with the Governor over his education reforms, which included making it easier to fire bad teachers.

And the editorial also explains why there wasnt much of an economic bounce when Brownbacks tax cuts were implemented, but suggests there was a bit of good news.

Mr. Brownback was unlucky in his timing, given the hits to the agricultural and energy industries that count for much of the state economy. But unemployment is still low at 3.7%, and the state has had considerable small-business formation every year since the tax cuts were enacted. The tax competition across the Kansas-Missouri border around Kansas City is one reason Missouri cut its top individual tax rate in 2014.

I concur. When I examined the data a few years ago, I also found some positive signs.

In any event, the WSJ is not overly optimistic about what this means for the state.

The upshot is that supposedly conservative Kansas will now have a higher top marginal individual income-tax rate (5.7%) than Massachusetts (5.1%). And the unions will be back for another increase as spending rises to meet the new greater revenues. This is the eternal lesson of tax increases, as Illinois and Connecticut prove.

And Reason published an article by Ben Haller with similar conclusions.

What went wrong? First, the legislature failed to eliminate politically popular exemptions and deductions, making the initial revenue drop more severe than the governor planned. The legislature and the governor could have reduced government spending to offset the decrease in revenue, but they also failed on that front. Government spending per capita remained relatively stable in the years following the recession to the present, despite the constant fiscal crises. In fact, state expenditure reports from the National Association of State Budget Officers show that total state expenditures in Kansas increased every year except 2013, where expenditures decreased a modest 3 percent from 2012. It should then not come as a surprise that the state faced large budget gaps year after year. tax cuts do not necessarily pay for themselves. Fiscal conservatives, libertarians, may have the right idea when it comes to lowering rates to spur economic growth, but lower taxes by themselves are not a cure-all for a states woes. Excessive regulation, budget insolvency, corruption, older demographics, and a whole host of other issues can slow down economic growth even in the presence of a low-tax environment.

Since Haller mentioned spending, heres another Tax Foundation chart showing inflation-adjusted state spending in Kansas. Keep in mind that Brownback was elected in 2010. The left argued that he slashed spending, but that assertion obviously is empty demagoguery.

Now time for my two cents.

Looking at what happened, there are three lessons from Kansas.

  1. A long-run win for tax cutters. If this is a defeat, I hope there are similar losses all over the country. If you peruse the first chart in this column, youll see that tax rates in 2017 and 2018 will still be significantly lower than they were when Brownback took office. In other words, the net result of his tenure will be a permanent reduction in the tax burden, just like with the Bush tax cuts. Not as much as Brownback wanted, to be sure, but leftists are grading on a very strange curve if they think theyve won any sort of long-run victory.
  2. Be realistic and prudent. Its a good idea to under-promise and over-deliver. Thats true for substance and rhetoric.
    1. Dont claim that tax cuts pay for themselves. That only happens in rare circumstances, usually involving taxpayers who have considerable control over the timing, level, and composition of their income. In the vast majority of cases, tax cuts reduce revenue, though generally not as much as projected once supply-side responses are added to the equation.
    2. Big tax cuts require some spending restraint. Since tax cuts generally will lead to less revenue, they probably wont be durable unless theres eventually some spending restraint (which is one of the reasons why the Bush tax cuts were partially repealed and why Im not overly optimistic about the Trump tax plan).
    3. Tax policy matters, but so does everything else. Lower tax rates are wonderful, but there are many factors that determine a jurisdictions long-run prosperity. As just mentioned, spending restraint is important. But state lawmakers also should pay attention to many other issues, such as licensing, regulation, and pension reform.
  3. Many Republicans are pro-tax big spenders. Most fiscal fights are really battles over the trend line of spending. Advocates of lower tax rates generally are fighting to reduce the growth of government, preferably so it expands slower than the private sector. Advocates of tax hikes, by contrast, want to enable a larger burden of government spending. What happened in Kansas shows that its hard to starve the beast if youre not willing to put government on a diet.

By the way, all three points are why the GOP is having trouble in Washington.

The moral of the story? As I noted when writing about Belgium, its hard to have good tax policy if you dont have good spending policy.

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Thursday June 22, 2017 @ 03:15:39 AM mt

Unwarranted: Policing without Permission



A great deal of government surveillance of Americans is done without a warrant. And asserting your right against such surveillance is often virtually impossible. Barry Friedman, author of Unwarranted, comments.

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Thursday June 22, 2017 @ 03:15:38 AM mt

Does Trump Care about Spending Reform



The successful spending reforms of other countries may not yet be on the President's radar. They should be. Dan Mitchell explains.

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Thursday June 22, 2017 @ 03:15:15 AM mt

The Drive to Mandate Paid Family Leave



What can federally mandated unpaid family leave tell us about the likely impacts of a proposed mandate for paid family leave? Vanessa Brown Calder comments.

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Thursday June 22, 2017 @ 03:15:08 AM mt

Trumpism and Tylerism



What lessons does the accidental presidency of John Tyler have to tell us about the "Trumpism" emanating from the White House? Anthony Comegna comments.

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Thursday June 22, 2017 @ 03:15:07 AM mt

The Dictatorial Mandate of a 100 Days Presidential Metric



What does a successful first 100 days as President look like if not other branches of government rolling over? Gene Healy comments.

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