Tag Archives: taxes

The Supreme Court and the Constitution

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Here’s another implication of Chief Justice John Roberts’ ruling on the Patient Protection and Affordable Care Act, courtesy of The Wall Street Journal.

According to Chief Justice Roberts, the penalty is merely a tax on not owning health insurance, no different from “buying gasoline or earning income,” and it thus complies with the Constitution. This a large loophole. The result is that Washington has unlimited power to impose new purchase mandates and the courts will find them constitutional if Congress calls them taxes, or even if it calls them something else and judges call them taxes.

Except that not buying a thing or a service is radically different from buying that thing or service.  This isn’t merely a matter of opposites: opposites are related to each other.  There is no relation between buying or not buying—the thing/service being bought is known; the thing/service not being bought cannot be known, and so the bought/not bought functions can have no relation to each other whatsoever.

Chief Justice Roberts writes that construing the Commerce Clause as the Obama Administration argued “would open a new and potentially vast domain to congressional authority…. The Framers gave Congress the power to regulate commerce, not to compel it, and for over 200 years both our decisions and Congress’s actions have reflected this understanding.” [emphasis in the original]

But then

Supreme Court precedents going back to the 1920s and 1930s define penalties and taxes as mutually exclusive and critically different.

With this stroke, Roberts has cancelled the effect of his understanding on the limit of the Commerce Clause’s ability to compel commerce; he has simply transferred the ability to compel commerce to the Taxing Clause.  Which also had no prior compulsion power.

Whether the Federal government may compel our behavior via Commerce or via Taxing, our government now can compel our behavior.

This is judicial activism at its worst.

A Misunderstanding about (Government) Stimulus

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Dr Alan Blinder, in a recent op-ed in The Wall Street Journal, notes that

A debate now rages in Europe over whether fiscal austerity—that is, higher taxes and less spending—helps or hinders growth.  That’s progress of sorts.

He’s right as far as he goes, but then he goes on.

[A] similar debate rages here in the US—with the lone exception that our pro-austerity crowd abhors tax increases.

Here are the beginnings of Binder’s misunderstanding.  I don’t know of a pro-austerity crowd anywhere in the US, at least among Republicans and Tea Partiers.  These folks are plainly pro-growth, and that clearly demands less government spending—and lower taxes.  Contrary to Progressives’ beliefs, it isn’t the government’s money, and the government doesn’t need as much of it as it tries to claim from us in taxes.

…help state and local governments maintain their spending, which has now dropped 6.4% since its 2008 peak[.]

It doesn’t get any clearer than this.  Nor the Feds, nor the states, nor local governments need to “maintain their spending.”  All levels of government need to reduce spending and quit competing with the private sector for goods and services, quit buying for the private sector the goods and services it can—and should—buy for itself.  It’s through private sector economic activity that comes growth, and jobs, which fuel growth.  All government spending can do is substitute for private sector spending—at the expense of taking money out of the private sector to pay for that spending, either in taxes today or taxes tomorrow.

Many Democrats also want to build and repair more roads, bridges, tunnels and the like….  Most Republicans reject that idea, too….

This is just a cynical distortion of the Republicans’ position, and it’s disappointing to see in someone who’s supposed to be a reasonably objective academic.  The need to work on our physical infrastructure is  bipartisanly recognized.  What the Progressives’ programs do, though, and what the Republicans object to, is simply transfer funds to Progressive-favored state and local governments and to union allies.  Honest funding support, that will help—help, mind you, not cover entirely—with actual work, and which funding is itself covered by spending cuts elsewhere, will find Republican support.  Look, for instance, to the 20+ jobs bills the Republican House has passed and that are languishing in the Senate because Blinder’s Democrats won’t even permit them to be debated, much less come to a vote.

He does have some specific ideas:

  •  Budget policy. For openers, as I advocated in these pages last month, we need a two-pronged fiscal package.  In the near term, we need modest stimulus, focused tightly on creating jobs.  But that stimulus should be paired with a vastly larger dose of long-run deficit reduction—perhaps 10 to 20 times as large as the stimulus—over the 10-year budget window.

Economically, this can be done; it’s not even that hard. But if Republicans continue to reject even deals comprised of $10 of spending cuts for each $1 of tax increases, it’s hard to see how we get there politically.

I debunked this here.

  •  Private investment. Republicans are right that business investment is the key to growth. Fortunately, business investment has done very nicely, thank you, despite the sluggish economy—growing 8.4% over the past year and at an annual rate of 10.8% over the past two years.  (The corresponding growth rates for GDP were about 2%.)  So while there’s always room for improvement, business investment is not part of the problem.  The best thing policy can do for private investment is to get the overall economy growing faster.

Indeed.  And the best policy for achieving that is reduced government spending competition with the private sector, lower taxes, and reduced regulatory burden—which has exploded under the present administration.  The EPA’s rules are especially onerous, irrelevant to the economy, and job-destroying.  HHS’ regulations also attack private sector job growth, as well as such minor things as constitutionally protected religious freedom.

  •  Public investment. Unlike private investment, inadequate public investment is part of the problem.  America’s infrastructure needs are so huge, and so painfully obvious, that it’s mind-boggling we’re not investing more.  The U.S. government can now borrow for five years at about 0.75% and for 10 years at about 1.7%.  Both rates are far below expected inflation, making real interest rates sharply negative.  Yet legions of skilled construction workers remain unemployed while we drive our cars over pothole-laden roads and creaky bridges.  Does this make sense?

Public “investment” is, indeed, part of the problem.  “There’s a sale on! Let’s go buy!  Think how much we can save at these prices!”  Think how much more we can save, if we don’t buy at all.  The existence of a sale, whether it’s in a lower price for a good or a lower price for borrowing, is no excuse at all for spending—or borrowing.  Spending and borrowing must have a legitimate purpose, not merely be “cheap.”  All those nickels borrowed today add up to lots of dollars owed—and so taxed for—tomorrow.

Moreover, this administration poured nearly $1 trillion into stimulus—including no small part of infrastructure maintenance buildout and maintenance—in 2009, and it’s been pouring out more since, in the form of loan guarantees, among other routes, for “green” energy infrastructure, among other things.  What have we gotten for all that “investment?” Transfers to unions, transfers to states for their own payoffs, bankrupt “green” energy companies, but no actual infrastructure maintenance buildout or maintenance.  Does this make sense?

  •  Education. Everyone knows that the returns to education, while large, are long delayed.  That means we have no time to waste.  We should be doing a much better job of building a better educated, more productive work force for the future.  A Council on Foreign Relations task force co-chaired by former Secretary of State Condoleezza Rice and former New York City Schools Chancellor Joel Klein recently argued that better K-12 education is critical to American leadership in the world and therefore to our national security.

Indeed, again.  Government needs to stop driving up the cost of education by subsidizing it.  We as a society need to stop stigmatizing those who lack a college degree.  College is not for everyone.  Nor do those in the trades need a college degree; they need a decent VoTech source of education and training—the sort of thing we used to get in our high schools all those years ago, and that could be improved upon by our community colleges—many of which do fill this bill.

Why in the world are we still arguing about this?

Because the Democrats and their Do-Nothing Senate, and the President, are in the way.  If it’s Republican, it’s to be ignored.  It’s all Bush’s fault.  It’s racist.  Pick a Progressive excuse.

Which candidate does that remind you of?

In terms of not understanding the distinction between economic growth and government growth?  That’s pretty clear.

President Obama’s Obamacare Tax Increase on the Middle Class

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Straight from the horse’s mouth.  Chief Justice John Robert’s Majority Opinion includes this [emphasis added]:

The individual mandate cannot be upheld as an exercise of Congress’s power under the Commerce Clause.  That Clause authorizes Congress to regulate interstate commerce, not to order individuals to engage in it.  In this case, however, it is reasonable to con­strue what Congress has done as increasing taxes on those who have a certain amount of income, but choose to go without health insurance.  Such legislation is within Con­gress’s power to tax.

The whole opinion, and the two dissents, can be read here.

More on the EU Crisis

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The Wall Street Journal asks whether, with the EU and the euro zone falling deeper into their pit, Germany will act.

Germany, the only euro-zone nation with the economic heft to do so, has done the minimum necessary to keep vulnerable countries afloat…

they say, and

[T]he German government must decide whether saving the euro is worth putting the country’s own prosperity at risk.

But Germany has been acting, and for the most part quite appropriately—that “minimum” being too much intervention.

No one can save us from ourselves, or the Greeks from themselves.  We—and the Greeks—are the only ones who can do this.  Indeed, “salvation” imposed from outside can only make the inevitable conflagration that much worse.  It does so, in part, by not allowing the natural forces, of a free market in this case, to clear away the dead brush as it accumulates, so that when an otherwise lesser recession succeeds in igniting that inflammable detritus in several areas, they all explode into an out of control disaster—the current EU debt crisis.

The imposed “salvation” also acts, in part, to create a moral hazard that anaesthetizes its victims against the pain of acting on one’s own obligations and suffering the consequences of choosing unwisely or unfortunately (and those of choosing wisely or fortunately) without eliminating the critical need.  And this results, in the other nations “needing” the same bailout, which series threatens to bankrupt the benefactors as well as the beneficiaries.  The beneficiaries of this “aid” will be bankrupted by it; have no doubt of this.  The recipients of the loans being forced can never hope to repay them, and this can only cost the taxpayers of the lending nations—taxpayers who have the wherewithal explicitly because they, and their nations, have been acting responsibility.

Germany, which the rest of Europe and especially the Greeks, sees as their piggy bank, recognizes this risk, at least sub rosa, as demonstrated by their reluctance to fork over the cash.  It’s time for the rest of Europe to man up, also.

As the WSJ notes,

At a conference in Brussels last week, Thomas Steffen, state secretary at the German finance ministry, responded to criticism that Germany had been too slow to help its neighbors by making reference to the fable of the ant and the grasshopper.  The ant, he noted, works through the summer to store up food for the winter while the grasshopper wastes the warm months singing.

Some in the audience took the analogy as a call on southern Europe to take their fate into their own hands.

Mr. Steffen didn’t tell audience members how the fable ends: When winter comes, the starving grasshopper begs the ant for food. Rebuking the grasshopper for his idleness, the ant turns his back and crawls away.

Those in the audience took the analogy correctly—knowing the outcome of the fable.  It’s time for the Greeces of the EU, in particular, take their fate into their own hands; it’s late summer, and the fall approaches.

The growth policies they need to emplace must not be the currently proposed—or forced from outside—policies of government growth through higher taxes (if with proclaimed spending cuts).  Rather, the growth policies must be policies of shrinking governments, greatly reduced government spending, and greatly reduced taxes.  And in the cases of some countries, actually collecting those taxes that are levied.  The social practice of not paying the taxes is a social practice of stealing from one’s neighbors.  If the tax is disliked so much, then the people of that polity must elect a government that will rescind that tax.

Four More Years

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Here’s what we’ve seen in the last three years:

  • Obamacare, which nationalized 16% of our economy.
  • Dodd-Frank, which seeks to nationalize our financial industry in all but name with its control over private business financial decisions via the CFPB.
  • The HHS contraceptives, sterilization, and abortifacients mandate, which is a naked attack on our religious freedom.
  • Annual spending of $3.6 trillion in 2011, up from $3 trillion in 2008.
  • Annual deficits of $1.2+ trillion per year.
  • A national debt exploding to nearly 100% of GDP in 2011 from 60% in 2008.
  • A refusal even to consider a budget for the last three years.
  • A bailout of two American car companies (disingenuously called a bailout of the American auto industry, even though of the seven major car companies in the American industry, only two were in trouble).  The bailout worked so successfully that one of those American car companies is now an Italian car company, and the other one still is into us for $25 billion.
  • Hampering of our energy industry by slow-walking, or outright blocking, drilling capacity on Federal lands and, through regulation, attempting to decimate our coal producers.
  • Blaming this administration’s failure to answer our country’s challenges on everything from his predecessor to a tsunami in Japan, to ATMs, to the Arab Spring, to airport check-in kiosks, to Fox News, to Super PACs, to the Supreme Court, to….
  • Discussing the issues before us by denigrating the issue raiser.

Can we afford four more years?