Category Archives: regulation

Another VA Problem

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This one, though, isn’t primarily the Veterans Affair’s doing.

Veterans at the Shreveport, LA, Veterans Administration hospital have been going without toothbrushes, toothpaste, pajamas, sheets, and blankets while department officials spend money on new Canadian-made furniture, televisions to run public service announcements and solar panels….

Some specifics:

According to the VA, the department spent $74,412 on 24 flat screen TVs for “patient/employee information”—one 50 inches wide and the others 42 inches. The furniture cost $134,082, and the solar project was approximately $3 million.

This is shameful, but this falls on Congress. Under Federal funding rules, capital equipment—the TVs, solar, etc—fall into one funding category, and supplies—toothbrushes and paste, blankets, etc—fall into a separate category. Under those same rules, the VA (and any other agency whose funding falls into different categories) cannot take funds from, say, capital equipment, and spend it on, say, supplies. It gets even more bureaucratic than that. Agencies can’t reallocate capital expenses from one capital item to another: the VA can’t, for instance, take some of those $3 million from solar and buy more TVs with it. Only Congress can authorize such reallocations.

No, Congress must answer for this misallocation. That it’s what the VA asked for in its budget request may be true, but Congress—that collection of our directly elected representatives—isn’t supposed to be a rubber stamp for every request for money that wanders by. It’s our money Congress is allocating, not Congress’ and not the VA’s.

It’s true enough that the VA could have—should have—gone to Congress and asked for a reallocation on recognition of the supply funding shortfall. That it seems not to have is an internal VA problem that supports my argument for disbanding the VA and using the budget to fund vouchers sent directly to our veterans.

There are other problems described at the Watchdog.org link above that are entirely within the VA’s ability to correct, but this one is not.

Obamacare and Health Care

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As Dr Scott Atlas, of Stanford University’s Hoover Institution, in a recent The Wall Street Journal op-ed noted,

  • Private company medical innovation R&D spending in the US the last three years averaged 2.1%, down from an average of 6% over the previous fifteen
  • Malaysia, Thailand, Singapore, South Korea, India, and the EU had greater R&D spending growth in the same period
  • The PRC had a growth rate of 22%

Certainly, those other polities, the EU excepted, were starting from a much smaller base, and so their growth rates will tend to be exaggerated. Certainly, too, our own historically weak economy is exacerbating the situation.

All that notwithstanding, though, this is a trend that is allowed to continue at the peril of our leadership in things medical. Obamacare, with its removal of the insurance aspect of health plans, actively hurts this. What plan can pay for the latest and best drugs or devices, and so drive innovation—or even those drugs or devices that are merely near the cutting edge, or that are middle tier—when those plans aren’t allowed to recoup their costs, except at generalized taxpayer expense?

There’s one aspect, though, that is a direct assault on medical innovation, and that’s Obamacare’s medical-device excise tax. This is a tax the takes 2.3% off the top—that is, before expenses and profit—of all medical device sales. This includes devices from heart pace makers to dialysis units to bandages sold in bulk to hospitals.

2.3% is no big deal?

  • Johnson & Johnson’s medical device and diagnostic sales were down 1.5% in the US, versus up 1.8% internationally, in the first half of 2014
  • General Electric reported that the US healthcare sales shrank by 2% in the second quarter, versus up 2% in Europe
  • Medtronic’s US sales for the 2014 fiscal year were up 1.7%, versus 5.9% internationally
  • Baxter reported US sales of medical products were down 15% for the quarter ended June 2014, versus up 8% globally
  • Fresenius’ US sales of dialysis products were down 1.2% in the first half of 2014, versus up 0.6% internationally

And (via the first link above)

Boston Scientific, Stryker, and Cook Medical have announced job cuts and plans to open new centers for R&D, manufacturing, and clinical trials overseas.

And so on.

Many attempts have been made to repeal this pernicious tax, the latest this past summer. The Democrat-controlled Senate refused to consider it. Again.

In Which another Federal Judge Gets it Right

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Recall Halbig v Sebelius, the case wherein plaintiffs objected to subsidies being paid to Obamacare plan purchasers when the those plans were bought through ObamaMart, the Federally run health plan exchange, instead of through State-run health plan exchanges. The text of the Obamacare law allows the latter and bars the former. The DC Circuit agreed with plaintiffs and struck down the subsidies. (The current status of that ruling is that it’s been stayed pending review of Halbig by the DC Circuit sitting en banc.)

US District Judge Ronald White, of the Eastern District of Oklahoma, has ruled on a similar case that came up in his district, a part of the 10th Circuit. I won’t go into the specifics of Pruitt v Burwell, White’s case; the cases are very similar, and the point I want to make here is slightly different, anyway. I will note that plaintiff Pruitt is Oklahoma Attorney General Scott Pruitt, and defendant Burwell is Sylvia Mathews Burwell, HHS Secretary (sitting in for Kathleen Sebelius under an arcane Federal rule that allows such things). I will note further that Treasury Secretary Jacob Lew also was a defendant in this case, and leave things there.

White ruled for the plaintiff, which means he also held that the subsidies paid to Obamacare plan purchasers who bought them through ObamaMart are illegal.

Here’s where things get interesting.

In his conclusion, White wrote [citations omitted, emphasis mine]

Other judges in similar litigation have cast the plaintiffs’ argument in apocalyptic language. The first sentence of Judge Edwards’ dissent in Halbig is as follows: “This case is about Appellants’ not-so-veiled attempt to gut the Patient Protection and Affordable Care Act (‘ACA’).” Concurring in King, Judge Davis states that “[appellants’ approach would effectively destroy the statute….” Further, “[w]hat [appellants] may not do is rely on our help to deny to millions of Americans desperately-needed health insurance….”

And

Of course, a proper legal decision is not a matter of the court “helping” one side or the other. A lawsuit challenging a federal regulation is a commonplace occurrence in this country, not an affront to judicial dignity. A higher-profile case results in greater scrutiny of the decision, which is understandable and appropriate. “[H]igh as those stakes are, the principle of legislative supremacy that guides us is higher still…. This limited role serves democratic interests by ensuring that policy is made by elected, politically accountable representatives, not by appointed life-tenured judges.”

And

This is a case of statutory interpretation. “The text is what it is, no matter which side benefits.” Such a case (even if affirmed on the inevitable appeal) does not “gut” or “destroy” anything. On the contrary, the court is upholding the Act as written. Congress is free to amend the ACA to provide for tax credits in both state and federal exchanges, if that is the legislative will. … “But in the last analysis, these always-fascinating policy discussions are beside the point. The role of this Court is to apply the statute as it is written – even if we think some other approach might ‘accor[d] with good policy.’“

Finally, quoting from a ruling by his own 10th Circuit appellate court,

In reviewing statutes, courts do not assume the language is imprecise…. Rather, we assume that in drafting legislation, Congress says what it means.

And that’s the deal. A law says what Congress—the People’s directly elected representatives—says it says. A judge, or any appellate court at any level of our judicial hierarchy, can only apply that law to the case before him. Most especially, he cannot rewrite the law or “creatively interpret” it into something more agreeable to his personal philosophy.

Oh, and just to saucer and blow the thing, White formally ruled pretty clearly:

The court holds that the IRS Rule [allowing those subsidies] is arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law, pursuant to 5 USC §706(2)(A), in excess of statutory jurisdiction, authority, or limitations, or short of statutory right, pursuant to 5 USC §706(2)(C), or otherwise is an invalid implementation of the ACA….

Judge White’s ruling can be seen here.

 

h/t Jonathan Keim of the National Review Online

Ireland, Luxembourg, UK, and EU Commitments

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In a letter to the Irish government published Tuesday, the European Commission, the 28-member bloc’s central antitrust authority, said it had reached the “preliminary view” that tax deals struck in Ireland in 1991 and 2007 in favor of Apple constituted state aid.

1991! No statute of limitations here. That’s a small matter, though. The larger matter is the degree of freedom that sovereign nations have to govern their internal affairs while remaining a part of the European Union.

The beef here, and it’s a similar one involving Fiat in Luxembourg, and Starbucks and others in other constituent nations of the EU (the details vary from case to case), is this. Ireland didn’t impose a high enough tax on Apple’s Irish-earned income to suit the Authorities of the EU. That letter, in the form of a “report,” complained:

The main question in the present case is whether the rulings confer a selective advantage upon Apple insofar as it results in a lowering of its tax liability in Ireland….

The EU long has objected to the low Irish tax rates, insisting that these are somehow unfair to the other member nations, nations that have much higher tax rates. And no, don’t expect those nations to lower their taxes to compete; Ireland must raise its taxes so as to be less competitive.

The EU complained further:

[There were] several inconsistencies in the application of the transfer pricing method chosen when determining profit allocation [and costs had been] reverse engineered so as to arrive at a taxable income.

Because it’s shameful for a company—or a nation—to work to protect the company’s (and so the company owners’) money. It’s not their money, after all, it belongs to the EU. To paraphrase a man from the other side of the Pond, they didn’t earn that. Somebody else made that happen.

As James Stewart, a tax expert at Trinity College Dublin, noted,

There’s no doubt that this is damaging to Ireland. There’s a deeply held belief that our low corporate tax regime is central to Ireland’s industrial policy. The commission letter gives notice that these types of tax rates are under scrutiny. It will be much more difficult for Ireland to give similar deals to other multinational companies.

But that doesn’t matter. Ireland didn’t earn that, either.

The UK needs to watch this situation in Ireland very carefully and to think long and hard about the value of an EU commitment and the cost of EU insistence on intruding into the domestic affairs of its member nations. The importance of the occurrence of the UK’s EU membership referendum has gained immeasurably from this EU behavior, and the outcome of that referendum now is even more important to the vitality of the UK.

Ireland, Luxembourg, and the others, also need to think very carefully about the value they’re gaining from EU membership, and the costs they’re bearing from that membership. What is the EU’s commitment to its members, if it reserves the right to intrude?

The European Commission’s allegations can be seen here.

Arrogance and Encryption

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I wrote a bit ago about liberty and encryption. Here’s an example of the arrogance of the government’s attitude toward an American citizen encrypting his communications against government snooping.

Regarding Google and Apple plans to market encryption capabilities for their smart phones, FBI Director James Comey had this to say:

What concerns me about this is companies marketing something expressly to allow people to place themselves beyond the law[.]

This comes in the context of Brent Kendall’s paraphrase of Comey’s concern in Kendall’s WSJ article, also summarized in the link just above

FBI Director James Comey on Thursday said he is concerned about moves by Apple Inc and Google Inc to market phones that can’t be searched by law enforcement….

There are two things wrong with this, both of which a talented lawman at the peak of his career knows full well. First is the fact that encryption does not at all place anyone “beyond the law:” get a warrant. Also, the government, as has been well publicized, has an IT capacity fully capable of breaking encryption should the cell phone’s owner decide jail is preferable to honoring the warrant. Finally, the cell phone service providers aren’t the ones engaged in the communications of government interest; the cell phone owners are. The only legitimate targets of warrants for communications are the communicators, not the service providers.

The second thing wrong is the appalling arrogance inherent in Comey’s quoted statement. Leaving aside the foolishness of his claim of unsearchability, he’s cynically conflating “the law” with “law enforcement,” the police. Of course, this is…inaccurate. “The law” is what we citizens, through our elected representatives, say it is; the police are not the law but folks we hire to enforce it.

Here is the modern Liberal government in action.