A World Off-Balance on Monetary Policy

Hoisted from One Year Ago: Richard Epstein Proves Unintelligible...

Richard Epstein Proves Unintelligible...: I had always thought that Richard Epstein was just pulling the traditional not-very-ethical lawyer's trick of knowingly and falsely claiming that what he hoped would be law in the future had in fact been law in the past.

There is great and weighty precedent for this way of lawyering, after all.

Consider Lord Chief Justice William Draper, 1st Baron Wynford (13 December 1767 – 3 March 1845:

We [would] get rid of a great deal of what is considered law in Westminster Hall, if what Lord Coke says without authority is not law...

Now comes Scott Lemieux to say that I am wrong--that Richard Epstein has in fact drunk his own koolaid:

  • He really does believe that the Constitution mandated the classical-liberal social-Darwinist doctrines of Herbert Spencer's Social Statics a century before such doctrines were thought up...
  • He really does believe that misquotations of Jon Gruber should govern interpretations of ObamaCare...
  • He really does believe that Chevron was wrongly decided--that the Courts should flip a coin rather than let experts who understand the issue make (and possibly change) administrative decisions.


Scott Lemieux: That Word 'Intelligible,' I Do Not Think...: "'Don’t worry — if this falls through I have a compelling theory that all federal social welfare programs are unconstitutional under the emoluments clause'...

...You may remember Richard Epstein from such arguments as:

the takings clause makes the vast majority of the U.S. Code unconstitutional because as originally understood it enacted bad 20th century public choice theory.

It’s highly appropriate that he has gotten in on the ACA Troofer racket. He takes the now-dominant approach of a ‘¯(ツ)/¯’ midpoint between the ‘card says Moops!’ and ‘the Moops invaded Spain’ theories, with a bonus appearance from the most important figure in 21st Century American politics:

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

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

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

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

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

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

During oral argument, Chief Justice Roberts asked whether a different administration could switch interpretations on the statute to meet its own view. Solicitor General Verrilli answered, incorrectly, that such a switch is possible only if the new government could make out ‘a very strong case’ in view of the ‘disruptive consequences’ that such a shift would have. But in fact, Chevron itself involved just that kind of switch between the Carter and Reagan administrations, and no one required the substantial showing of cause that Verrilli mentioned. Unfortunately, such disruptive flip-flops are all too possible under Chevron. That is the strongest reason why the question should be treated as a question of law, which makes it impossible for one administration to reverse the decision of its predecessor.

The correct answers to the question of whether a future Republican administration could deny subsidies on the federal exchanges if the Court decides to uphold Burwell based on Chevron deference are ‘yes’ and ‘your point being?’

Changes in regulatory policy are things that happen when new administrations are elected.

I doubt that a future administration would in fact reverse this IRS regulation, but:

that doesn’t mean that it’s beyond their authority, and if Republicans want to deny subsidies on the federally established exchanges, it should be done through a Republican White House rather than having the courts do their dirty work.

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

And finally, the inevitable punchline:

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

I don’t know what’s funnier:

  • the idea that there’s any chance this Republican Congress would pass a fix,
  • his preemptively blaming Obama for the chaos of the Supreme Court wrecking the exchanges, or
  • the assertion that it would be ‘illicit’ for Obama to continue to provide tax credits on federal exchanges if he was explicitly authorized by Congress to do so.

The assumption--without--argument that ‘block grants’ would be better than a uniform federal exchange even though most states have demonstrated neither the willingness or the competence to establish exchanges is also unintentionally amusing. A definitive version of ACA trooferism, in other words.