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During oral arguments of the Burwell v Obamacare case before the Supreme Court, the U.S. Solicitor General Donald Verrilli made the case that the “court should defer to the interpretation of the Internal Revenue Service, which said the tax credits apply nationwide.” When the Obamacare decision was announced, it is clear that SCOTUS did apply deference, which was absolutely the worst possible solution.
The idea of “deference” refers “ to “Chevron deference,” “a doctrine mostly unknown beyond the halls of the Capitol and the corridors of the Supreme Court. It refers to a 1984 decision, Chevron U.S.A., Inc. v. Natural Resources Defense Council, Inc., and it is one of the most widely cited cases in law. Boiled down, it says that when a law is ambiguous, judges should defer to the agency designated to implement it so long as the agency’s decision is reasonable.”
Given the current catastrophic state of the IRS, SCOTUS should have run from this idea as quickly as possible. The IRS has proven overwhelmingly in the last few years that no decision it makes is “reasonable” and therefore cannot be trusted as an unbiased, independent agency capable of carrying out a professional opinion on this or virtually any manner.
Even more unfortunately, not only did SCOTUS apply deference, which allowed the IRS rule to stand, it did so by taking expanding the concept of “Chevron Deference” even further in order to validate its decision. George Will, in a column written just after the Obamacare ruling was handed down, described how the decision now allows the executive branch to apply deference in situations that are not just ambiguous, but also “inconvenient for the smooth operation of something Congress created.” This is not interpreting law — this is legislating.
Therefore, the actions of the IRS — that is, willy-nilly creating rules which expanded the scope of Obamacare beyond its text — were indeed endorsed and given political cover by Roberts and his majority as they applied Chevron Deference. Instead of sending Obamacare back to the legislature for clarification, the judicial branch decided to step in and interpret the law for the sake of alleviating “inconvenience”. But this is wrong. Convenience, ease, and expediency should never be a rationale for the judicial branch to go beyond the scope of deciding whether or not a law is constitutional, as they did here.
The judicial branch, with this decision, seemed to act more in harmony with the legislative and executive one, instead of serving as a check against the others. What’s more, “besides violating the separation of powers, this approach raises serious issues about whether litigants before the courts are receiving the process that is due to them under the Constitution. It would result if its branches behaved as partners in harness rather than as wary, balancing rivals maintaining constitutional equipoise.”
Will summed up the damage Roberts has done, which is likely to have lasting effects in the courts for years to come. Roberts goes “beyond “understanding” the plan; he adopts a legislator’s role in order to rescue the legislature’s plan from the consequences of the legislature’s dubious decisions. By blurring, to the point of erasure, constitutional boundaries, he damages all institutions, not least his court.”
How the Supreme Court uses and applies Chevron Deference in the coming years, in the way they did with this decision, will be especially interesting, given the expanded roles of many government agencies such as the EPA and FCC.
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It was on July 2, 1776 that the Second Continental Congress, assembled in Philadelphia, formally approved Richard Henry Lee’s resolution for independence from Great Britain.
Pennsylvania Evening Post published on July 2: “This day the Continental Congress declared the United Colonies Free and Independent States.”
In a letter to his wife Abigail, John Adams wrote: “The Second Day of July 1776, will be the most memorable Epocha, in the History of America.”
“I am apt to believe that it will be celebrated, by succeeding Generations, as the great anniversary Festival. It ought to be commemorated, as the Day of Deliverance by solemn Acts of Devotion to God Almighty. It ought to be solemnized with Pomp and Parade, with Shews, Games, Sports, Guns, Bells, Bonfires and Illuminations from one End of this Continent to the other from this Time forward forever more.”
July 4th is the day Jefferson’s edited version of the Declaration of Independence was actually adopted after the Continental Congress tweaked it several times. Historians believe that it wasn’t actually signed until August.
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I really enjoyed this column by George Will, which was published soon after the Obamacare decision. Will explores how the decision exemplifies how Chief Justice Roberts embraced and expanded the concept of “Chevron Deference”, which, he contends, will have a lasting affect on future court decisions.
For those of you who don’t know, Chevron Deference basically says that agencies charged with administering statutes are entitled to deference when they interpret ambiguous statutory language. Will charges that the decision now allows the executive branch to apply deference in situations that are not just ambiguous, also “inconvenient for the smooth operation of something Congress created.” Check out the column below:
Conservatives are dismayed about the Supreme Court’s complicity in rewriting the Affordable Care Act — its ratification of the IRS’s disregard of the statute’s plain and purposeful language. But they have contributed to this outcome. Their decades of populist praise of judicial deference to the political branches has borne this sour fruit.
The court says the ACA’s stipulation that subsidies are to be administered by the IRS using exchanges “established by the State” should not be construed to mean what it says. Otherwise the law will not reach as far as it will if federal exchanges can administer subsidies in states that choose not to establish exchanges. The ACA’s legislative history, however, demonstrates that the subsidies were deliberately restricted to distribution through states’ exchanges in order to pressure the states into establishing their own exchanges.
The most durable damage from Thursday’s decision is not the perpetuation of the ACA, which can be undone by what created it — legislative action. The paramount injury is the court’s embrace of a duty to ratify and even facilitate lawless discretion exercised by administrative agencies and the executive branch generally.
The court’s decision flowed from many decisions by which the judiciary has written rules that favor the government in cases of statutory construction. The decision also resulted from Chief Justice John G. Roberts Jr.’s embrace of the doctrine that courts, owing vast deference to the purposes of the political branches, are obligated to do whatever is required to make a law efficient, regardless of how the law is written. What Roberts does by way of, to be polite, creative construing (Justice Antonin Scalia, dissenting, calls it “somersaults of statutory interpretation”) is legislating, not judging.
Roberts writes, almost laconically, that the ACA “contains more than a few examples of inartful drafting.” That is his artful way of treating “inartful” as a synonym for “inconvenient” or even “self-defeating.”
Rolling up the sleeves of his black robe and buckling down to the business of redrafting the ACA, Roberts invents a corollary to “Chevron deference.”
Named for a 1984 case, Chevron deference has become central to the way today’s regulatory state functions. It says that agencies charged with administering statutes are entitled to deference when they interpret ambiguous statutory language. While purporting to not apply Chevron, Roberts expands it to empower all of the executive branch to ignore or rewrite congressional language that is not at all ambiguous but is inconvenient for the smooth operation of something Congress created. Exercising judicial discretion in the name of deference, Roberts enlarges executive discretion. He does so by validating what the IRS did when it ignored the ACA’s text in order to disburse billions of dollars of subsidies through federal exchanges not established by the states.
Chevron deference does for executive agencies what the “rational basis” test, another judicial invention, does for legislative discretion.
Since the New Deal, courts have permitted almost any legislative infringement of economic liberty that can be said to have a rational basis. Applying this extremely permissive test, courts usually approve any purpose that a legislature asserts. Courts even concoct purposes that legislatures neglect to articulate. This fulfills the Roberts Doctrine that it is a judicial function to construe laws in ways that make them perform better, meaning more efficiently, than they would as written by Congress.
Thursday’s decision demonstrates how easily, indeed inevitably, judicial deference becomes judicial dereliction, with anticonstitutional consequences. We are, says William R. Maurer of the Institute for Justice, becoming “a country in which all the branches of government work in tandem to achieve policy outcomes, instead of checking one another to protect individual rights. Besides violating the separation of powers, this approach raises serious issues about whether litigants before the courts are receiving the process that is due to them under the Constitution. It would result if its branches behaved as partners in harness rather than as wary, balancing rivals maintaining constitutional equipoise.
Roberts says “we must respect the role of the Legislature” but “[A] fair reading of legislation demands a fair understanding of the legislative plan.” However, he goes beyond “understanding” the plan; he adopts a legislator’s role in order to rescue the legislature’s plan from the consequences of the legislature’s dubious decisions. By blurring, to the point of erasure, constitutional boundaries, he damages all institutions, not least his court.
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Dear Governor Rauner,
You have an enormous task before you in trying to navigate pension reform. Through political duplicity, the state legislature in cahoots with the public service unions have fashioned for themselves retirement benefits far in excess of any reasonable amount. The Courts, appointed by the same players, have determined that it is not even legal to revisit the magnitude of these retirement benefits. It must be difficult to draw up a plan when your hands are legally tied from being able to make actual changes to the pension system in order to alleviate the $100 billion in debt. As such, I propose an alternative solution:
Since the courts refuse to allow you to negotiate with the workers for lower pension benefits, then take the negotiations to the worker’s base pay. Simply take the costs of the excessive retirement benefits for each employee and subtract it from the worker’s base pay in determining the new base pay under the new contract. The Courts may not allow a reduction in retirement benefits, but there is certainly no Constitutional provision preventing the negotiating of a lower base salary.
There is no rule that someone must be paid the same base pay amount as last year. If you are constrained from the pension end of the contract, then you ought to change their next offer and reduce their overall compensation from the base pay end, thereby restricting compensation and benefits to amounts no greater than what those skills would command and be realistically afforded in the private sector.
Overhauling the contract process from this end will provide an opportunity for fiscal reform. This will ensure that, going forward, no worker be paid more in any new contract then what can be actually afforded, without regard to what the prior contract provided. Once a current contract ends, there is nothing on the table; nothing prevents any new contract from offering less that the prior contract, especially where pay and benefits of the prior contract are out of line and hamstrung by ironclad guarantees.
The people of Illinois realized when they elected you, that decades of fiscal mismanagement needed to end in order to ensure that Illinois has a chance. Even though it may be politically difficult and unpalatable, anybody representing the taxpayers has an obligation to those taxpayers. Budget reform and deficit reduction will naturally follow once compensation levels have been stabilized and brought in line with realistic affordability. Contract negotiations must happen in order for long term sustainability to be achieved.
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Frederic Bastiat, one of the brightest and most eloquent economists and authors France has ever produced, was born on this date in 1801. Some selections of his wisdom:
“The State is the great fiction through which everyone endeavors to live at the expense of everyone else.”
“[T]he bad economist pursues a small present good, which will be followed by a great evil to come, while the true economist pursues a great good to come, at the risk of a small present evil.”
“When plunder becomes a way of life for a group of men in a society, over the course of time they create for themselves a legal system that authorizes it and a moral code that glorifies it.”
“Life, liberty, and property do not exist because men have made laws. On the contrary, it was the fact that life, liberty, and property existed beforehand that caused men to make laws in the first place.”
“If the natural tendencies of mankind are so bad that it is not safe to permit people to be free, how is it that the tendencies of these organizers are always good? Do not the legislators and their appointed agents also belong to the human race? Or do they believe that they themselves are made of a finer clay than the rest of mankind?”
“[A]t whatever point on the scientific horizon I begin my researches, I invariably reach this one conclusion: The solution to the problems of human relationships is to be found in liberty.”
If you haven’t read “The Law”, start there to get a good introduction to Frederic Bastiat. The Foundation for Economic Freedom (FEE), has a free download, as well as many other economic writings available.
Happy Birthday Bastiat!
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The SCOTUS ruling against the EPA was a breath of fresh air (see what I did there?). Before adjourning until October, the Supreme Court decided that recent EPA rules did not consider cost compliance. The Washington Examiner had a good overview of the ruling. This decision will likely affect other recent EPA rules.
“The Supreme Court ruled 5-4 against Environmental Protection Agency pollution rules for power plants Monday, in a blow to President Obama’s environmental agenda.
The majority decision, written by Justice Antonin Scalia, said the EPA has to consider the costs of complying with the rules and sent the air pollution regulations back to the agency.
The EPA rules in question regulate hazardous air pollutants and mercury from coal- and oil-fired power plants, known as the MATS regulations. The regulations went into effect April 16. The utility industry had argued that the rules cost them billions of dollars to comply and that EPA ignored the cost issue in putting the regulations into effect.
“EPA must consider cost — including cost of compliance — before deciding whether regulation is appropriate and necessary. It will be up to the agency to decide (as always, within the limits of reasonable interpretation) how to account for cost,” Scalia wrote in agreeing with the industry.
The decision will have repercussions for other EPA regulations that are key to Obama’s climate change agenda. The EPA will now have to examine the cost of compliance for the Clean Power Plan, which is at the heart of the president’s environmental agenda.
Many of the companies have either made the investments or closed power plants to comply. If the investments necessary to upgrade a plant to comply with the regulation aren’t justified when considering the operational costs, revenues earned and other factors, then the decision is made to retire it.
The D.C. Circuit Court Appeals favored the EPA in a previous lawsuit filed by the industry, attempting to overturn the rules, which is why they took it to the Supreme Court to decide the cost issue.
The D.C. Circuit was split in its decision, but the majority ruling prevailed. At the center of the case is the question of whether the regulation of hazardous air pollutants from electric utilities are “appropriate and necessary.” On that issue the court was split, but a two-judge majority agreed that the EPA could ignore costs in determining whether to regulate the utility sector.
The D.C. Circuit majority also agreed the EPA could focus solely on the utilities’ contribution to the pollutants of concern, rather than identifying any specific health hazards attributable only to utility emissions.
The EPA had argued that the rules are both appropriate and necessary regardless of the costs, and that it has the discretion under the law to act as it deems fit in regulating hazardous pollutants.”
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Chief Justice Roberts on Obamacare in 2012: “It is not our job to protect the people from the consequences of their political choices.”
This line famously echoed in Robert’s majority the first time Obamacare came before the Supreme Court, pointing out that it is not the business of the Supreme Court of the United States to fix laws (good or bad) that Congress passes.
Three years later, Roberts made an about-face on this exact point essentially saying with his decision that Obamacare is a bad law and poorly written — so we will fix it.
It really is a fascinating thing. First we have Pelosi saying we have to pass the law to see what is in it. And then when we actually get to see and experience the incoherence of the law, Roberts declares that Congress’s stupidity is not his job to fix.
But then the problem became that the Senate didn’t actually have the votes to fix it properly or repeal it entirely. Congress discovered that the law which was passed (state exchanges only) was not the version Congress wanted (federal exchanges too), but the Senate couldn’t get the 60 votes they needed to pass the version they wanted, especially after the Republicans lost Massachusetts a couple years ago.
So good old Roberts gifted them what they needed to have the law that they should have written with this recent opinion. And for Robert’s act of judicial overreach and maneuvering, Scalia’s dissent was particularly scathing:
“Rather than rewriting the law under the pretense of interpreting it, the Court should have left it to Congress to decide what to do about the Act’s limitation of tax credits to state Exchanges…The Court’s insistence on making a choice that should be made by Congress both aggrandizes judicial power and encourages congressional lassitude…
Just ponder the significance of the Court’s decision to take matters into its own hands. The Court’s revision of the law authorizes the Internal Revenue Service to spend tens of billions of dollars every year in tax credits on federal Exchanges. It affects the price of insurance for millions of Americans. It diminishes the participation of the States in the implementation of the Act. It vastly expands the reach of the Act’s individual mandate, whose scope depends in part on the availability of credit…
But this Court’s two decisions on the Act will surely be remembered through the years. The somersaults of statutory interpretation they have performed (“penalty” means tax, “further [Medicaid] payments to the State” means only incremental Medicaid payments to the State, “established by the State” means not established by the State) will be cited by litigants endlessly, to the confusion of honest jurisprudence. And the cases will publish forever the discouraging truth that the Supreme Court of the United States favors some laws over others, and is prepared to do whatever it takes to uphold and assist its favorites. I dissent.”
Scalia was particularly clear that the Supreme Court took it upon themselves to insert themselves into the legislative branch. Put another way, Chief Justice Roberts became the 60th vote in the Senate.
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From Scotusblog:
Decision of the Fourth Circuit is affirmed in King v. Burwell. 6-3.
This means that individuals who get their health insurance through an exchange established by the federal government will be eligible for tax subsidies.
Chief Justice writes for the Court. Six are the Chief, Kennedy, Ginsburg, Breyer, Sotomayor, and Kagan.
Dissent by Scalia, joined by Alito and Thomas.
Court refused to apply Chevron deference — that is, to find that the statute is ambiguous and that the federal government’s interpretation was reasonable.
From Scalia’s dissent: “We should start calling this law SCOTUScare.” From the intro to Scalia’s dissent: the majority’s reading of the text “is of course quite absurd, and the Court’s 21 pages of explanation make it no less so.”
From the majority opinion: “Congress passed the Affordable Care Act to improve health insurance markets, not to destroy them.”
The majority also acknowledges that the challengers’ “arguments about the plain meaning . . . are strong.”
‘In this instance, the context and structure of the Act compel us to depart from what would otherwise be the most natural reading of the pertinent statutory phrase’…
The opinion is here
Justice Scalia’s dissent, via the WSJ:
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In the past couple of months, I drew attention to a case that would be decided by the Supreme Court this term, which I felt was probably the biggest property-rights case since the Kelo decision 10 years ago. You can read the background here. In sum, the property in question this time is not land, but raisins. A couple, the Hornes, who were raisin farmers in California were fined for declining to participate in a government sponsored raisin regulatory group in existence since the Truman Administration.
Writing a letter to the Agriculture Department, they called the program “a tool for grower bankruptcy, poverty, and involuntary servitude.” The raisin police were not amused. The Raisin Administrative Committee sent a truck to seize raisins off their farm and, when that failed, it demanded that the family pay the government the dollar value of the raisins instead.”
This morning, SCOTUS ruled 8-1 in favor of the raisin growers, the Hornes. The majority opinion found “that the Agriculture Department program, which seizes excess raisins from producers in order to prop up market prices during bumper crop years, amounted to an unconstitutional government “taking.”
But they limited their verdict to raisins, lest they simultaneously overturn other government programs that limit production of goods without actually seizing private property.
The 8-1 decision was written by Chief Justice John Roberts, with the court’s more conservative justices in agreement. Roberts said the government violates citizens’ rights when it seizes personal property — say, a car — as well as real property such as a house.
While the government can regulate production in order to keep goods off the market, the chief justice said it cannot seize that property without compensation.”
Only Sotomayor dissented. She did not recognize the government’s fines a form of taking, saying that the rule “only applies where all property rights have been destroyed by governmental action.” In saying so, she indicated that the Hornes did retain some of their property rights, a logic that mirrored the ridiculousness of the Ninth’s Circuits’ opinion.
You can read the full court ruling here. The best quote goes to Justice Clarence Thomas who noted in his concurrence to the majority opinion, that “having the Court of Appeals calculate “just compensation” in this case would be a fruitless exercise.“
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One of the major sticking points regarding the free trade talks is a portion known as TAA, or “Trade Adjustment Assistance”. “The Trade Adjustment Assistance (TAA) Program is a federal program that provides a path for employment growth and opportunity through aid to US workers who have lost their jobs as a result of foreign trade,” and this program is slated to expire at the end of September, unless Congress reauthorizes is. The funding source for the new TAA bill, as passed by the Senate last month, is a $700 million reduction to Medicare funding. But the vote neared, the pressure to change the funding source and spare Medicare reached a crescendo.
An alternative funding solution was prepared, one that is particularly odious. TAA, if passed, will be financed by “raising the penalties for misfiled taxes”.
Here’s how it would work. As it stands now, small businesses who pay independent contractor/freelancers are supposed to report that income to the IRS using a 1099 form. Another copy of that form goes to the contractor/freelancer. If a small business files all their forms past the deadline or not at all, it receives a fine. The new proposal, “would double and triple these fines.”
This merely serves to empower the IRS, who frankly, is the last arm of the government who deserves increased power right now. Because this measure specifically creates an incentive to raise revenue for the express purpose of funding another government program, you can be sure the IRS will be incentivized to pay closer attention to our small businesses and pounce on paperwork error.
This proposal is reminiscent of the program that was approved as a revenue raiser for Obamacare a few years ago. Congress initially voted to increase the fines meted out for small businesses who did not file a 1099 for anyone paid a mere $600 or more in a calendar year, but the backlash was so great, that Congress appealed it before the law took effect. Though this new gimmick is not quite the same, it is equally abhorrent.
The underlying assumption is that there are enough businesses who don’t file, or misfile all their forms, so they deserved to be penalized even more by substantially increasing compliance fines – all for the express purpose of funding something else by the government. Instead of the government making spending cuts to existing programs in order the TAA program alive, it chooses to target the private sector again for more money.
Congress has a deadline of July 30th to re-vote on the TAA bill. If it plans to re-authorize the program, perhaps it will find a better way to fund it than off of the backs of small businesses.
