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Student Loan Debt: It's Not All Bad

Courtney Such - July 3, 2015

As the national conversation about student debt continues, Ben Miller, senior director for post-secondary education at the Center for American Progress, has released a paper criticizing the lack of focus on whether the students who accumulate debt are getting degrees.

We took a few minutes to discuss his findings. The interview has been edited for length and clarity.

Why do you think people overlook graduation rates when they talk about student debt?

I think high debt numbers catch people's attention, so when you set out to write a news story, talking about $100,000 in debt immediately grabs a reader in a way that saying people with $6,000 in debt are really struggling does not. We like to go for the big, scary numbers, even if those aren't really representative of where the true numbers lie.

If you had to summarize your findings in just a few sentences, how would you do so?

The big idea is this: The purpose of student debt is to help someone afford a degree or another credential, so if you look at how much debt it costs per college graduate, the student-loan debt is not nearly as scary as if you just look at the total amount of borrowing out there. It suggests that places that have higher debt levels but also produce a lot of college graduates are probably much better off than places where they may have less debt, but fewer people completing college.

People who borrow and complete college are much better off than those who borrow and drop out. The best available data we have on this is from people who started college in 2003 and were in default by 2009 — over 60 percent of them had dropped out of college. Another 20-some-odd percent had only earned a certificate. So what you see there is that the biggest problems with student debt are occurring among people who borrowed but didn't get the credential they were seeking.

So this is trying to bring in some understanding that debt-with-degree is not nearly as bad as debt-and-drop-out.

Were there any results that surprised you or stood out the most?

I think what surprised me is that some of the states that on paper look like they have the highest debt per borrower, like Maryland and Virginia, also have a lot of college graduates, so their debt per graduate is much lower and much more reasonable. If you just look at Virginia's debt statistics, it looks like a state that's drowning in student-loan debt. But if you look at how it does in college completion, it looks a lot better. So there, it is possible that the student debt accumulated is going toward a credential, and it's not as big of a problem.

By contrast, you have a state like Louisiana, where the debt levels aren't that high, but a lot of the number of people who complete college is also pretty low. And so there, it suggests you might have a lot more people who are borrowing and not graduating, and that's the riskiest place to be if you have student-loan debt.

Do high graduation rates necessarily mean that people are getting good jobs?

Not necessarily. But I think what's important to understand is, before you even want to get into the "are people getting good jobs" conversation, we have to acknowledge that borrowing and not finishing puts people in a very risky situation.

By and large, college graduates do okay with student debt. The big exception to that are the people who only earn a certificate, or who go to low-quality programs where graduation may not mean as much. I think there is an issue we need to think about in terms of the debt levels for graduates versus what jobs they are going into, but first we really have to deal with the people who are so unable to pay their debt that they are defaulting.

For the college graduates who may not get good jobs, they have a payment issue in that they may be paying too much of their monthly income, but they can make it work with some help. For the dropouts with debt, I think we have an utter affordability problem — they are making close to minimum wage, irregularly employed, things of that nature — that require us to address them first.

What can we learn from D.C. specifically, with its odd blend of high completion and debt?

D.C. in some ways is a funny example, because it has so much graduate debt, and it shows where difficulty arises. One out of every twelve people in D.C. is a lawyer, and there is so much debt that comes with getting these graduate credentials that it can start to distort the picture.

And this is what we see nationally. The average bachelor's-degree graduate who borrows is just under $30,000. That's a lot of money, but it's not financially ruinous, assuming you do okay. But the problem is then a lot of people go on to graduate school, where they pick up easily double or triple that amount in a single year, and what was an affordable debt level can quickly become unaffordable. So I think there is a broader problem we have to look at, which is how much debt people are picking up from graduate studies.

D.C. is also a little bit of a strange outlier because it's a city-state If we had the figures for New York City alone, it may look similar as well.

Do you have any proposals on how to tackle the problem of high debt but low attainment?

Part of the issue is that we need to recognize that it's not high absolute levels of debt — it's high relative levels of debt. By that I mean someone who borrows $5,000 and drops out in the first semester can very easily wreck their finances. And so I think we need to do more to take the risk away from people who try college and don't make it through the first semester, because they are in the riskiest place for debt.

I think we probably need to demand more of the federal student-loan servicers to conduct better outreach for borrowers who did not complete, because we don't want to just wait 270 days into the fall and then try to deal with them. And when it comes to students who seem riskier, we need to support them more and try not to ask them to take out too much debt right away, so that if it doesn't work out, we haven't put them in a very dangerous position going forward.

How would you determine what the "risky student" is?

I think that's where we could use more data and analytics here. I think you would want to look at things like high-school grades, their age, are they going part time, and what other responsibilities do they have in their life. We should also ask how good the school is. Does this school tend to have a pretty good track record with these kinds of students, or does it do poorly? Because that's worth knowing, too.

To be clear, I'm not saying we shouldn't enroll these students anyway. We absolutely should. But we shouldn't make it a risky lottery ticket for them to go to college. We should make it so they can try it, hopefully succeed, but if they don't, we have not put them in a difficult place.

Is there anything I should have asked, but did not?

My aim here is just getting people to understand that not all student debt is scary. If you borrow and it leads to a high quality credential, you are probably going to turn out okay. It's the borrowing and not achieving our goals that should be our biggest concern first.

Courtney Such is a RealClearPolitics intern.

Take the Marriage Issue Away From SCOTUS

Thomas K. Lindsay - July 2, 2015

To the list of losers in the Obergefell case — the Constitution, democracy, and religious liberty — we could come in time to add another: the Supreme Court itself. In the process, the same-sex-marriage decision could become a powerful 2016 campaign issue.

The Court was labeled by Alexander Hamilton "the least dangerous" branch of government because it also is the least democratic. Federal judges do not run for office, and their tenure generally is for life. This is required to give them the space and time to detect and overturn unconstitutional enactments by the other two, popularly elected, branches. That is to say, the undemocratic character of the Court is justified by its commitment to defend, not its own intentions, but only those clearly found in the Constitution itself. Everyday national legislation requires the approval of only a simple majority (50 percent plus one) of legislators. Such legislation can never claim to trump the Constitution, which was ratified by a supermajority. The Constitution provides the means for its own transformation, the amendment process, which requires also requires a supermajority.

Simply put, because of its undemocratic character, the Court's powers are limited by the Constitution to those deemed "least dangerous." As Hamilton observed, the Constitution provides the Court "neither force nor will, but merely judgment." Not any judgment will suffice, but only dispassionate, nonpartisan reasoning about the Constitution's intentions. Under the doctrine of "judicial self-restraint," it is only by restraining itself to upholding the Constitution that the Court can justify its undemocratic character to a democratic people.

Forget all that now. The modern Court — not only here in Obergefell, but for some time — has too often abandoned judicial self-restraint in favor of results-oriented jurisprudence. Which results, and whose? Not those found in the Constitution or in the will of the people's representatives, but those currently favored by a majority of nine unelected judges. How did we get here? How can today's Court blithely encroach on the constitutionally protected police powers of the states, which include all laws relating to health and morals?

Clearly, a good deal of America's movement toward centralized government owes to the demands of an ever-more-sophisticated modern economy and advances in communications technology. However, no less responsible for the blows struck at federalism (protected by the Tenth Amendment) has been the "rights explosion." With the Fourteenth Amendment serving, contrary to its framers' intent, as the constitutional conduit by which the bulk of the Bill of Rights' provisions (along with a growing number of created rights) has trickled to the states, uniformity necessarily has emerged where federalism-created diversity previously prevailed.

Driving this judicial revolution is the conviction that threats to civil liberty posed by states, communities, and private associations outweigh the benefits of the civic education that participation at these levels provides. Obergefell claims to find a Fourteenth Amendment right to same-sex marriage, although even a glance at the debates over ratification of the amendment shows that its focus was solely to ensure that states would not violate the rights of the newly freed slaves. Same-sex marriage, practiced nowhere at the time, was never an object of the amendment. This massive fact did not hinder a reckless Court majority (five of its nine members) from subverting rather than interpreting the Constitution through the imposition of what it calls its "reasoned judgment."

Thomas Jefferson anticipated this. The Declaration of Independence's author appears prescient in his warnings of coming judicial "despotism." Justice Antonin Scalia's Obergefell dissent correctly labels the Court's abandonment of the Constitution a "threat to democracy," but this did not occur, as he argues, through a "judicial Putsch." The Court has not imposed its will on a powerless legislature. Congress has all-too-gladly handed its power to the federal courts. Why?

The overwhelming majority of legislators operate on the basis of the "electoral imperative," which mandates that they avoid principled conflict whenever possible in order to enhance their reelection prospects. Disputes that are deeply political also most antagonize a good number of a legislator's constituents; so, too many politicians retreat to "the-Court-has-spoken" dodge.

In the face of this abdication by their elected representatives, how have voters responded? By reelecting them regularly.

What if Congress reclaimed its constitutional powers? How might it do this after the Court has spoken? One answer is provided in the Constitution itself. Article III stipulates that the Supreme Court has "original jurisdiction" in a limited number of cases. The rest of its domain falls under its "appellate jurisdiction." Here the Constitution adds a crucial qualification. The Court's appellate jurisdiction can be limited by those "Exceptions, and under such Regulations as the Congress shall make."

Through the "Exceptions and Regulations Clause," Congress can remove whole classes of cases from the Court's jurisdiction. Through a simple majority vote, Congress could today take the Court out of the marriage issue, returning the issue's deliberation to its proper place, the 50 states. Although the current president would veto such a measure, his successor could prove friendlier to restoring the states' constitutional powers.

Some find in this prospect of congressional revitalization a potential campaign issue for 2016. They envision a 2016 version of the GOP's 1994 Contract With America, through which Republicans nationalized the local congressional races, in the process recapturing the House for the first time since 1954. If an "Exceptions and Regulations" national movement arose among pro-federalism voters, the electoral imperative, which previously drove legislators to cede their power to courts, could incentivize them to relocate their spines and, with them, the rule of law.

Of course, should such a movement gain traction, there would be the inevitable legal challenges to Congress's power to invoke this clause over same-sex marriage. No matter. At the very least, such a movement, occurring in a presidential election year, would serve powerfully to remind the Court of what the Obergefell majority apparently has forgotten — that its power ultimately depends on the people's representatives.

History suggests that such a reminder could have its intended effect. After winning reelection in 1936, Franklin Roosevelt proposed his "Court-packing" scheme, under which Congress would use its constitutional power over the size of the Court's membership to increase it from nine to fifteen. FDR intended then to "pack" the Court with six new members favorable to his New Deal legislation, which the Court had largely struck down during his first term. The proposal failed. But it also succeeded — wildly — in moving the Court to thereafter approve New Deal legislation. The Court had been reminded that, under the Constitution, it has neither "force nor will, but merely judgment."

Court critics suggest that another benefit of such a national movement would be the education it would provide American voters, who can be expected never to have heard of the Exceptions and Regulations Clause. This is not their fault. U.S. Department of Education statistics show that, today, roughly two out of every three college students graduate without ever having taken even one course in American government. Such a popular movement could fill the civic-education vacuum left by our universities' abdication of this vital task.

But will Congress act in accord with the powers and duties provided it under the Constitution? History gives us few reasons for confidence. Congress has tried and failed before to pass "Exceptions and Regulations" bills. But the times may be changing, and Obergefell, contrary to its intentions, could spark the beginning of a democratic renaissance.

However, if legislators use Obergefell only to beat their breasts (and fill their campaign coffers), without employing the legitimate constitutional means at their disposal — and if like-minded voters let them get away with it (again) — then, finally, we may get the government Jefferson feared: judicial despotism.

Thomas K. Lindsay directs the Centers for Tenth Amendment Action and Higher Education at the Texas Public Policy Foundation and is editor of He was deputy chairman of the National Endowment for the Humanities under George W. Bush.

The Justice Department's Hidden Race Data

Robert VerBruggen - July 1, 2015

Back in 2010, Ron Unz of The American Conservative set off a debate by arguing that Hispanics didn't have higher crime rates than non-Hispanic whites, and therefore crime shouldn't be a concern when it comes to immigration from Latin America. He had to argue this using a variety of roundabout calculations and obscure data sources, however, because good, national data weren't readily available.

For example, the federal government's National Crime Victimization Survey, which asks people about their experiences with crime, didn't allow interviewees to identify their attackers as "Hispanic." And the racial and ethnic offender breakdowns stopped being published in routine reports after 2008, though the raw numbers were still available in the full data sets.

It turns out the Justice Department has been holding out on us. It fixed the way it asked about offenders' races, but this went unnoticed because the data were no longer publicized. Heather Mac Donald got the numbers:

These data, in addition to being crucial for today's debates over criminal-justice disparities, allow us to do some quick math to check Unz's thesis. According to the Census, in 2012-13 there were 195 million non-Hispanic whites, 37 million non-Hispanic blacks, and 53 million Hispanics (of any race). And multiplying out the numbers in the top row above, we find that 2.8 million annual victimizations were perpetrated by whites, 1.5 million by blacks, and 960,000 by Hispanics.

Which allows us to (very roughly) estimate rates of committing violent crime, using victim surveys and thus avoiding some of the problems with arrest and conviction rates:

Whites 14 per 1,000
Blacks 40 per 1,000
Hispanics 18 per 1,000

So, Hispanics have a higher rate than whites — almost 30 percent higher. But Hispanics also tend to be younger. In the 2012-13 Census data, 41 percent of Hispanics are age 16-40, compared with 30 percent of whites and 36 percent of blacks. So, relative to whites, Hispanics are about 30 percent more likely to commit violent crimes, but also about 30 percent more likely to be in the age range where violent crimes are most common. If there's a gap, age might explain it, as Unz suggested.

There are caveats here. If Hispanic offenders are often perceived as white, black, or "other" by their victims, they won't be counted properly for comparison with the Census numbers. Hispanic is an ethnic rather than racial category, so it overlaps with racial groupings. (Five percent of Hispanics are black, for example.) Another thing to bear in mind is that immigrants tend not to commit crimes, while this is not true of their children; Hispanics are far more likely than whites to be foreign-born (35 percent vs. 4 percent). If it's fair to adjust for age, it might also be fair to adjust for nativity.

But on balance these numbers are somewhat favorable to Unz. Cutting the other way: Hispanics are about twice as likely as whites to be murdered, and several times as likely to show up at the ER with gunshot wounds.

Robert VerBruggen is editor of RealClearPolicy. Twitter: @RAVerBruggen

Jason Kuznicki, Cato Institute - July 1, 2015

Give Rand Paul points for trying: His opinion piece about marriage policy in the wake of Obergefell did better than many other Republicans have done. He did not call for resurrecting the dead — and politically toxic — Federal Marriage Amendment. He would appear to be actually considering the issues at stake, which is a good start.

But contrary to the promise of the headline (which he probably didn't write anyway), the measures that Senator Paul recommends would not get government "out of the marriage business altogether." Judging by what he actually wrote, local government would still control entry and exit from civil marriage, and civil marriage itself would apparently still continue to exist. Many federal consequences, like Social Security survivorship and the ability to sponsor an immigrant spouse, would presumably continue to flow from marital status - and they'd still be unavailable in any other way.

This isn't such a terrible thing, necessarily. Marriage policy is really, really complicated. As long as we have a government, and as long as it's making important decisions about our families and property, at least some parts of civil marriage may actually be worth saving. Marriage can serve as a protection against the state, one that (among lots of other things) keeps families together and makes the Social Security system run marginally more justly: If anyone deserves to recoup some of what the government takes by way of the payroll tax, it's the widow of the worker who "contributed." And if anyone is competent to sponsor a new citizen, it must be that new citizen's spouse.

Meanwhile, leaving the entry conditions of marriage to the states would have been neither crazy nor unprecedented. It's what has very often happened throughout our country's history, and if the Supreme Court had gone that route, we'd likely have had ubiquitous gay marriage soon enough anyway. Historically speaking, states have commonly set very diverse requirements to enter into a marriage. These state-level requirements have included blood tests, waiting periods, and varying limits on consanguinity and age, to name just the big ones. (Also, notoriously, some states formerly set racial requirements, which I obviously deplore.)

Although the Supreme Court has repeatedly called marriage a fundamental right — including in Obergefell — the Court has also historically left the entry conditions of civil marriage to the states. It has intervened only seldom in this area. Interventions have included permitting interracial marriage, forbidding polygamy, allowing convicts to marry, and now permitting same-sex marriage, a decision I certainly approve of. If the state is to extend civil marriage, it ought to do so without respect to gender.

Not that I approve of everything that the civil aspect of marriage does. Far from it.

Contrary to what Senator Paul seems to claim, I am not aware that government has ever taxed marriage per se. The reality is a lot more complicated than that. There's a marriage penalty to the income tax, but there's also a marriage bonus. Which one you get depends on your income, your spouse's income, and the distribution between them, as this baffling chart from the Tax Foundation shows.

As if the perverse incentives of the above chart were not enough, there's a deeper problem: The weird income tax effects of marriage can't be eliminated until we either scrap the graduated income tax or cease to levy it on anything other than an individual basis. (Neither of those would be a bad idea, necessarily, though the latter would leave households of equal incomes taxed unequally if their income distributions were unequal. I'm not sure why we'd want to do that, but when you make the tax rates progressive, that's what you're stuck with. It's that or a marriage penalty and/or bonus. Mathematically, it just can't be any other way.) Ultimately the tax effects of marriage are one of those areas where marriage policy would better off if we hit the reset button - on the tax system.

A good deal of the confusion about the meaning of marriage could also be remedied by admitting that there are in fact two kinds of marriage in the United States, private and civil. They usually happen at the same time, but they are quite distinct, legally. Private marriages can and should be recognized (or not) by individuals, churches, and families, freely and on a case-by-case basis. This is a matter of religious and associational liberty, and as such it should remain fully protected by the First Amendment. "Marriage" in this sense is not a government matter at all.

This private sort of marriage is a fundamental and negative right; it doesn't need the government's help to come into being. On this Rand Paul is absolutely correct, and I share his concern that churches and religiously observant businesses will be compelled to celebrate marriages that they find unconscionable. This they should not be forced to accept. (It hardly matters that these are scruples that have only lately appeared: Same-sex marriage itself has only lately appeared.)

The supporters of same-sex civil marriage, myself included, need to be magnanimous in victory, and we should now strive to protect those who are not inclined to celebrate our civil marriages in their private associations. We gays and lesbians in particular have felt the sting that can come from being in a politically powerless minority, and we ought not to inflict it on others.

So much for the private aspects of marriage, which are matters of natural (and negative) right. Civil marriage, meanwhile, is a civil right, like the right to vote, or the right to a trial by jury. Civil rights wouldn't exist in the state of nature, but in a governed state they can, and many of them clearly should. Our current implementation of civil marriage is tied up with welfare and tax policy in ways that libertarians correctly find troubling, as discussed above. But civil marriage also helps to clean up a lot of otherwise serious disputes in property and child custody law, and in matters of medical care and legal representation. Having marriage settles many questions and closes off many avenues by which the government might otherwise make itself troublesome.

All of this is to say that civil marriage is a bundle, and not all of it in my opinion is bad. Some of it can make our family lives more orderly and more predictable, more stable and actuallyless governed by judges and lawyers (and nosy relatives) — and more governed by ourselves, in exactly the ways that we see fit.

That's a thing that libertarians perhaps should want after all: If the government ever got outof the marriage business, we might suddenly find it much more in all of our family lives.

Jason Kuznicki is editor of Cato Unbound. This piece originally appeared on the Cato Institute's blog.

The Debt Is Still a Major Threat

James C. Capretta - June 30, 2015

Federal budget deficits and the growing national debt are less in the news these days for a couple of reasons. For starters, annual deficits are expected to be lower for the next several years compared with the recent past. The Congressional Budget Office projects that the 2015 federal deficit will be $486 billion — a lot of borrowed money for sure, but far less than the $1.3 trillion average deficit from 2009 to 2012. CBO expects the annual deficit to remain essentially the same through 2018. Further, deficit spending and what to do about it is an unpopular topic for politicians, so if they can avoid talking about it, they do. And journalists and the public care only if there's an immediate crisis that cannot be ignored.

But just because the issue isn't in the news every day doesn't mean the problem has gone away. Indeed, CBO's recent report on the long-term budget outlook makes it clear that mounting federal debt remains the most serious non-military threat to our continued strength and prosperity.

The size and scope of the problem were made much worse by the financial crash of 2008 and its aftermath. From 2009 to 2012, the federal government ran a cumulative deficit of $5 trillion, almost doubling the national debt. This put the government in a very deep financial hole even before the retirement of the Baby Boom generation. Federal debt now stands at 74 percent of GDP, far above the post-war norm of around 35 to 40 percent. This means the country is entering a very challenging period of fiscal stress, driven by the aging of the population and rising health expenses, from a position of considerable weakness.

CBO's long-term forecast shows federal debt will never again return to the post-war norm. Instead, the national debt will rise inexorably and exceed 100 percent of GDP in 2040. The primary cause of unending federal deficits is rapidly rising entitlement spending. In 1970, spending on Social Security, Medicare, and Medicaid totaled about 3.7 percent of GDP. By 2040, CBO expects spending on these programs, plus the subsidies made available by the Affordable Care Act (ACA), will total 14.2 percent of GDP. That's an immense shift of resources toward consumption-oriented entitlement spending.

As bad as that CBO's projection looks, it is almost certainly too optimistic. It assumes spending on everything outside of the big entitlements — everything from welfare programs, to highway funds, to defense spending — will fall from 9.1 percent of GDP today to 6.8 percent in 2040. For that to happen, the U.S. military would have to become a shell of what it has been for a century, even as spending on the National Institutes of Health and much else also got cut. That's never going to happen.

Further, CBO's baseline scenario assumes revenues will rise, from 17.7 percent of GDP today to 19.4 percent by 2040. That's a more realistic possibility, but it still presumes a tolerance for federal taxes that is well outside of the historical norm.

CBO acknowledges that this baseline — built around current law and policy — will seem infeasible to many observers, and thus constructs an “extended alternative fiscal scenario” with differing assumptions. In this scenario, spending outside of the main entitlements is slightly higher in 2040 than it is today, and federal revenue is held close to its historical average throughout the projection period. If actual policy matched these assumptions, the result would be absolute fiscal calamity. Debt would soar and exceed 100 percent of GDP by 2030 and 150 percent of GDP by 2040.

And even these projections are likely to be too optimistic. That's because the projections for Medicare assume implausible restraint on payments to hospitals and physicians. The ACA imposed a “productivity adjustment factor” on future payments to hospitals, which, in practical terms, means the normal inflation adjustment added to hospital reimbursement rates every year will be reduced by an average of 1.1 percentage points. And this isn't a one-time event. The adjustment occurs every year, indefinitely. Similarly, physicians are now looking at getting no more than a 0.75 percentage-point annual increase in their fees for taking care of Medicare patients. The actuaries who do the projections of Medicare finances believe both of these restraints on payments are unsustainable and will eventually have to be overridden with new legislation. And when that occurs, Medicare's future spending path will be well above the levels in CBO's current forecast.

The United States is not Greece, but it is still instructive to observe what has occurred there and elsewhere when debt levels have soared. At some point, countries with high levels of public debt pass a threshold above which continued borrowing to cover expenses is prohibitively expensive or infeasible. When they reach that point, the only available path forward is painful and immediate austerity.

There's no reason the U.S. should stumble into such a disastrous future. But avoiding it will require making serious and fundamental changes in fiscal policy, beginning sooner rather than later.

In practical terms, that means reforming the major entitlement programs so that they do not consume such an immense proportion of projected federal revenues. The key themes of a serious reform effort should be: encouraging longer working lives, e.g. by raising retirement ages and lowering explicit and implicit taxes on wages; altering programs to require middle- and upper-middle-class households to finance more of their own retirement and health-care needs out of their personal resources; improved efficiency in the health system through strong price competition and consumer choice; and more state flexibility and responsibility in running programs within fixed budgets.

It goes without saying that implementing reforms of this kind will not be easy. But, if policymakers begin the process now, they can protect current beneficiaries from any changes and implement these policies for future program participants in ways that allow benefits to grow in generosity, just not as fast as projected in current law.

The alternative is to simply ignore the problem and hope it somehow goes away. That's effectively what policymakers are doing today. But CBO's latest report is another reminder that pretending the problem doesn't exist is really an invitation to be hit with a fiscal and economic crisis of such severity that everyone, politicians included, will regret not taking action to head it off.

James C. Capretta is a senior fellow at the Ethics and Public Policy Center and a visiting fellow at the American Enterprise Institute.

Stephen Rose - June 30, 2015

Most Democrats in the House of Representatives opposed granting the president Trade Promotion Authority because they think international trade has been bad for American workers. (The legislation, which President Obama signed yesterday, gives the president guidelines for negotiating trade agreements and promises that such agreements will be given an up-or-down vote in Congress, with no filibustering or amendments.) Part of their opposition is based on the prevalence of the "Made in X" label, where X is often China or another low-wage country. The mass media perpetuates this concern by creating "challenges" to buy only American-made products for Christmas or for furnishing a house, saying that it is doable but very difficult.

But this is a myopic way of looking at international trade. Consumers, who typically interact only with retailers, never see many elements of the economy. Behind each final sale is a long chain of activities embedded in the cost of the good or service.

Consider the process of making shoes. Only 50 percent of the final price goes toward imports, paying for materials, manufacturing, and packaging. The American half of the cost of shoes pays for shipping, retail mark-up, advertising, insurance, and the cost of renting space. LeBron James's Nike endorsement and even the camera operators who film Nike ads are part of this process.

Shoes are America's single most import-intensive product. About 45 percent of the final price of clothing and new cars goes abroad. And all those stories about a lack of American-made toys or furniture miss the fact that the American component of the final price of these items is 73 and 78 percent respectively.

Many toy and furniture workers lost their jobs because of the great jump in imported products in these areas. And many of the communities in which these workers are concentrated were hard-hit. But the 16.5 percent of GDP that imports represent is mostly offset by the 13.5 percent of GDP that comes from exports.

The common-sense view is that this 3 percent trade deficit leads to an equivalent share of the labor force not having jobs that they otherwise would have. Most economists, however, think the trade effect is minor. In particular, as the accompanying figure shows, they look at the unemployment rate and the deficit as a share of GDP and don't see any correlation. For example, in both the 1980s and the 1990s, the trade deficit was rising and the unemployment rate was falling.

The problem with the trade debate is that both sides overstate the effects of trade. The opponents of trade point to the many products assembled abroad as evidence that a substantial portion of the workforce is at risk of being outsourced. The proponents cite the large number of export jobs to argue that trade is a net job gainer for Americans. In reality, the biggest benefit of trade is that it makes the world economy more efficient, which leads to lower prices in highly industrialized countries like the United States. By one estimate from a group of Harvard researchers, the benefit of trade could be as high as $1 trillion a year.

The benefits of trade are substantial but diffuse, while the costs to displaced workers and their communities are smaller but far more concentrated. Theoretically, this can be solved by having those who benefit from trade subsidize those who lose. While this is the logic of the recent trade bill, subsidies of the size the legislation offers have historically not been enough to re-train these workers so that they can get comparable jobs.

Hence, those who may face displacement oppose expanding trade, and the labor and progressive movements in this country have successfully pressured congressional Democrats — and presidential candidate Hillary Clinton — to oppose the trade act, even though the number of workers who will be affected is relatively small.

Stephen Rose is an affiliated scholar with the Urban Institute and research professor with George Washington University. 

Obamacare's Next Five Hurdles to Clear

Julie Appleby et al., KHN - June 29, 2015

In its first five years, the Affordable Care Act has survived technical meltdowns, a presidential election, two Supreme Court challenges — including one resolved Thursday — and dozens of repeal efforts in Congress. But its long-term future still isn’t ensured. Here are five of the biggest hurdles remaining:Spacer

Medicaid Expansion. About 4 million more Americans would gain coverage if all states expand the state-federal Medicaid programs to cover people with incomes at or slightly above the poverty line. Twenty-one states with Republican governors or GOP-controlled legislatures, including Texas and Florida, have balked, citing ideological objections, their own budget pressures, as well as skepticism about Washington’s long-term commitment to pay for most of the costs.

Anemic Enrollment. Eighteen million Americans who are eligible to buy insurance in federal and state marketplaces haven’t purchased it. Those marketplaces have had particular trouble enrolling Hispanics, young adults and people who object to being told to buy insurance.  Federal funding used by state marketplaces to enroll people and advertise is drying up. Many state marketplaces haven’t figured out how to be self-sustaining. Vermont, Hawaii, Colorado and Rhode Island are among those states searching for more money. The penalty for going without coverage rises next year to $695 per adult or 2.5 percent of family income — whichever is larger.Spacer

Market Stability. Nationally, premiums haven’t gone up too much on average in the first two years of the marketplaces, but that could change. The federal government has been protecting insurers from unexpectedly high medical bills, but that cushion disappears after next year. At the same time, insurers finally have enough experience with their initial customers to figure out if their premiums are sufficient to cover medical costs. If they’re not, expect increases.Spacer

Affordability. People who get their insurance through their employer have mostly been spared jolts from the health law. But the federal government begins taxing expensive health plans in 2018. The “Cadillac tax,” created by the health law, will pressure employers to offer skimpier health coverage or pass the taxes’ cost on to their employees. Also, individuals buying their insurance on the health law marketplaces continue to risk large out-of-pocket costs if they need lots of care. Their maximum financial obligations for next year are $6,850 for individuals and $13,700 for families. Those who choose to go out of their insurance network may have no ceiling on how much they may have to pay.

Political Resistance. Thursday’s ruling did little to diminish the GOP’s zeal to repeal the health law. Republicans on both sides of the Capitol pledged to continue their efforts to kill the ACA. A lawsuit filed by House Republicans last year alleges the president overstepped his authority when implementing the health law. The topic remains grist for the 2016 presidential campaign, with several Republican presidential candidates — including Sen. Lindsey Graham, R-S.C., and former Florida Gov. Jeb Bush  — reiterating their desire to repeal the law. If the Republicans capture both the White House and Congress in 2016, all bets are off over whether the law survives intact.

Kaiser Health News (KHN), where this piece originally appeared. is a nonprofit national health policy news service. KHN writers Julie Appleby, Mary Agnes Carey, Phil Galewitz, and Jordan Rau contributed to this report.

Licensing Undocumented Drivers

Keren Murillo Umpierrez - June 29, 2015

Six years ago, James and his wife Regina were two of 2,000 people who received a letter from the Pennsylvania Department of Transportation informing them that they had to surrender their driver's licenses or face possible repercussions. Since James and Regina were undocumented immigrants, their individual tax identification numbers (ITINs) allowed them to legally file taxes, but not to claim the associated tax benefits, such as driving, as a result of the REAL ID Act of 2005. Although not all states have fully complied with these stipulations, the act, in principle, requires that Social Security numbers, rather than ITINs, be used to secure a license — and Social Security numbers are not given to the undocumented.

James had been in the process of applying for an employment-based visa, which would have provided legal status to him, his wife, and even his daughter. But the new license requirements made that pursuit nearly impossible. To maintain the job that was sponsoring his visa, James needed to be able to drive to work. Now he would have to drive illegally, knowing that any minor road infraction could lead to deportation, and to losing everything he had worked toward. Regina faced the same dilemma. Her income composed half of the family's earnings, and she too needed to drive — to get to work, to take her daughter to after-school activities, and to buy groceries. She broke into tears as she handed in her license, feeling vulnerable and scared now that the thin layer of security had been ripped away. "In this country, the power to drive, to drive peacefully with a license, is a necessity. It's not a question of luxury, but of necessity," she told me.

Ineffective Measures for National Security
Prior to the September 11 terrorist attacks, few states explicitly barred unauthorized immigrants from obtaining a driver's license. Shortly after 9/11, however, restrictions amped up, largely because of the revelation that the terrorists had obtained state-issued driver's licenses. Following the recommendation by the 9/11 Commission to "set standards for the issuance of sources of identification, such as driver's licenses," the REAL ID Act was implemented.

The restrictions were proposed to prevent future acts of terrorism, even though the hijackers legally entered the United States with visas and acquired legitimate IDs. While seven of the hijackers fraudulently misrepresented their state or residency, they did not misrepresent their identities or legal status. Furthermore, one of the hijackers used his Saudi passport to board the plane, indicating that a U.S. driver's license was irrelevant in this scenario.

The driver's-license restrictions implemented after 9/11 would have been fruitless in preventing the attacks. In fact, the information from the terrorists' licenses proved to be critical in identifying the persons responsible for the attacks, as federal authorities relied heavily on the licenses' photographs.

Denying licenses to undocumented immigrants does nothing to address the issue of domestic terrorism. Rather, it adds an additional hurdle for law-enforcement officials to clear when attempting to identify persons who may pose security concerns.

A Matter of Road Safety
Since driving is such a vital function in daily American life, restricted access to licenses does not deter unauthorized immigrants from driving; rather, it further criminalizes them. And because licensing requires a driving test and knowledge of road rules, it can make a significant difference in preventing accidents.

A 2011 report by the AAA Foundation for Traffic Safety revealed that unlicensed drivers are more likely to be involved in fatal crashes than licensed ones. Of the unlicensed drivers involved in fatal crashes, a significant majority (84.5 percent) were between the ages of 18 and 64, meaning that unlicensed drivers are not primarily underage, as might be expected.

To make matters worse, without a license, immigrants are not eligible for auto insurance. As a result, licensed drivers must pay higher premiums for accidents caused by unlicensed drivers. A 2014 study by the Insurance Research Council revealed an estimated $2.6 billion insurance loss in 2012 based on uninsured motorists claims from that year.

Not Just Undocumented Immigrants
According to the National Immigration Law Center, restrictions on obtaining licenses and identification cards have not only affected the undocumented population, but have also had a negative impact on U.S. citizens and lawful permanent residents. The NILC found that stringent requirements to prove identity have prevented senior citizens and people with disabilities who do not have current government-issued photo IDs from securing benefits and essential services.

Fortunately, states still hold some power to maneuver around the REAL ID Act. In fact, ten states, Puerto Rico, and the District of Columbia are currently issuing driver's licenses or driving privilege cards — distinctly marked licenses with severely restricted use — regardless of immigration status. Additionally, all 50 states, Nebraska being the last to join just last month, have expanded the issuance of driver's licenses to eligible beneficiaries of the Deferred Action for Childhood Arrivals (DACA) program, which grants certain undocumented youth a renewable work visa and exemption from deportation for a two year period.

The next logical step is for states to allow all residents to apply for licenses, regardless of immigration status. Making this change will undoubtedly lower the nationwide risks associated with unlicensed drivers. We can no longer ignore the day-to-day needs of immigrants by holding up the facade of "preserving national security."

Keren Murillo Umpierrez is an immigration-policy intern at the Century Foundation, where she researches humanitarian and immigrant-rights issues.  

SCOTUS on Gay Marriage: An Excerpt

U.S. Supreme Court - June 26, 2015

Editor's note: This is the syllabus of Obergefell v. Hodges, summarizing Justice Anthony Kennedy's majority opinion. Citations have been removed.

Michigan, Kentucky, Ohio, and Tennessee define marriage as a union between one man and one woman. The petitioners, 14 same-sex couples and two men whose same-sex partners are deceased, filed suits in Federal District Courts in their home States, claiming that respondent state officials violate the Fourteenth Amendment by denying them the right to marry or to have marriages lawfully performed in another State given full recognition. Each District Court ruled in petitioners' favor, but the Sixth Circuit consolidated the cases and reversed.

Held: The Fourteenth Amendment requires a State to license a marriage between two people of the same sex and to recognize a marriage between two people of the same sex when their marriage was lawfully licensed and performed out-of-State.

(a) Before turning to the governing principles and precedents, it is appropriate to note the history of the subject now before the Court.

(1) The history of marriage as a union between two persons of the opposite sex marks the beginning of these cases. To the respondents, it would demean a timeless institution if marriage were extended to same-sex couples. But the petitioners, far from seeking to devalue marriage, seek it for themselves because of their respect—and need—for its privileges and responsibilities, as illustrated by the petitioners' own experiences.

(2) The history of marriage is one of both continuity and change. Changes, such as the decline of arranged marriages and the abandonment of the law of coverture, have worked deep transformations in the structure of marriage, affecting aspects of marriage once viewed as essential. These new insights have strengthened, not weakened, the institution. Changed understandings of marriage are characteristic of a Nation where new dimensions of freedom become apparent to new generations.

This dynamic can be seen in the Nation's experience with gay and lesbian rights. Well into the 20th century, many States condemned same-sex intimacy as immoral, and homosexuality was treated as an illness. Later in the century, cultural and political developments allowed same-sex couples to lead more open and public lives. Extensive public and private dialogue followed, along with shifts in public attitudes. Questions about the legal treatment of gays and lesbians soon reached the courts, where they could be discussed in the formal discourse of the law. In 2003, this Court overruled its 1986 decision in Bowers v. Hardwick, which upheld a Georgia law that criminalized certain homosexual acts, concluding laws making same-sex intimacy a crime "demea[n] the lives of homosexual persons." In 2012, the federal Defense of Marriage Act was also struck down. Numerous same-sex marriage cases reaching the federal courts and state supreme courts have added to the dialogue.

(b) The Fourteenth Amendment requires a State to license a marriage between two people of the same sex.

(1) The fundamental liberties protected by the Fourteenth Amendment's Due Process Clause extend to certain personal choices central to individual dignity and autonomy, including intimate choices defining personal identity and beliefs. Courts must exercise reasoned judgment in identifying interests of the person so fundamental that the State must accord them its respect. History and tradition guide and discipline the inquiry but do not set its outer boundaries. When new insight reveals discord between the Constitution's central protections and a received legal stricture, a claim to liberty must be addressed.

Applying these tenets, the Court has long held the right to marry is protected by the Constitution. For example, Loving v. Virginia invalidated bans on interracial unions, and Turner v. Safley held that prisoners could not be denied the right to marry. To be sure, these cases presumed a relationship involving opposite-sex partners, as did Baker v. Nelson, a one-line summary decision issued in 1972, holding that the exclusion of same-sex couples from marriage did not present a substantial federal question. But other, more instructive precedents have expressed broader principles. See, e.g., Lawrence. In assessing whether the force and rationale of its cases apply to same-sex couples, the Court must respect the basic reasons why the right to marry has been long protected. This analysis compels the conclusion that same-sex couples may exercise the right to marry.

(2) Four principles and traditions demonstrate that the reasons marriage is fundamental under the Constitution apply with equal force to same-sex couples. The first premise of this Court's relevant precedents is that the right to personal choice regarding marriage is inherent in the concept of individual autonomy. This abiding connection between marriage and liberty is why Loving invalidated interracial marriage bans under the Due Process Clause. Decisions about marriage are among the most intimate that an individual can make. This is true for all persons, whatever their sexual orientation.

A second principle in this Court's jurisprudence is that the right to marry is fundamental because it supports a two-person union unlike any other in its importance to the committed individuals. The intimate association protected by this right was central to Griswold v. Connecticut, which held the Constitution protects the right of married couples to use contraception, and was acknowledged in Turner. Same-sex couples have the same right as opposite-sex couples to enjoy intimate association, a right extending beyond mere freedom from laws making same-sex intimacy a criminal offense.

A third basis for protecting the right to marry is that it safeguards children and families and thus draws meaning from related rights of childrearing, procreation, and education. Without the recognition, stability, and predictability marriage offers, children suffer the stigma of knowing their families are somehow lesser. They also suffer the significant material costs of being raised by unmarried parents, relegated to a more difficult and uncertain family life. The marriage laws at issue thus harm and humiliate the children of same-sex couples. This does not mean that the right to marry is less meaningful for those who do not or cannot have children. Precedent protects the right of a married couple not to procreate, so the right to marry cannot be conditioned on the capacity or commitment to procreate.

Finally, this Court's cases and the Nation's traditions make clear that marriage is a keystone of the Nation's social order. States have contributed to the fundamental character of marriage by placing it at the center of many facets of the legal and social order. There is no difference between same- and opposite-sex couples with respect to this principle, yet same-sex couples are denied the constellation of benefits that the States have linked to marriage and are consigned to an instability many opposite-sex couples would find intolerable. It is demeaning to lock same-sex couples out of a central institution of the Nation's society, for they too may aspire to the transcendent purposes of marriage.

The limitation of marriage to opposite-sex couples may long have seemed natural and just, but its inconsistency with the central meaning of the fundamental right to marry is now manifest.

(3) The right of same-sex couples to marry is also derived from the Fourteenth Amendment's guarantee of equal protection. The Due Process Clause and the Equal Protection Clause are connected in a profound way. Rights implicit in liberty and rights secured by equal protection may rest on different precepts and are not always coextensive, yet each may be instructive as to the meaning and reach of the other. This dynamic is reflected in Loving, where the Court invoked both the Equal Protection Clause and the Due Process Clause; and in Zablocki v. Redhail, where the Court invalidated a law barring fathers delinquent on child-support payments from marrying. Indeed, recognizing that new insights and societal understandings can reveal unjustified inequality within fundamental institutions that once passed unnoticed and unchallenged, this Court has invoked equal protection principles to invalidate laws imposing sex-based inequality on marriage, and confirmed the relation between liberty and equality.

The Court has acknowledged the interlocking nature of these constitutional safeguards in the context of the legal treatment of gays and lesbians. This dynamic also applies to same-sex marriage. The challenged laws burden the liberty of same-sex couples, and they abridge central precepts of equality. The marriage laws at issue are in essence unequal: Same-sex couples are denied benefits afforded opposite-sex couples and are barred from exercising a fundamental right. Especially against a long history of disapproval of their relationships, this denial works a grave and continuing harm, serving to disrespect and subordinate gays and lesbians.

(4) The right to marry is a fundamental right inherent in the liberty of the person, and under the Due Process and Equal Protection Clauses of the Fourteenth Amendment couples of the same sex may not be deprived of that right and that liberty. Same-sex couples may exercise the fundamental right to marry. Baker v. Nelson is overruled. The State laws challenged by the petitioners in these cases are held invalid to the extent they exclude same-sex couples from civil marriage on the same terms and conditions as opposite-sex couples.

(5) There may be an initial inclination to await further legislation, litigation, and debate, but referenda, legislative debates, and grassroots campaigns; studies and other writings; and extensive litigation in state and federal courts have led to an enhanced understanding of the issue. While the Constitution contemplates that democracy is the appropriate process for change, individuals who are harmed need not await legislative action before asserting a fundamental right. Bowers, in effect, upheld state action that denied gays and lesbians a fundamental right. Though it was eventually repudiated, men and women suffered pain and humiliation in the interim, and the effects of these injuries no doubt lingered long after Bowers was overruled. A ruling against same-sex couples would have the same effect and would be unjustified under the Fourteenth Amendment. The petitioners' stories show the urgency of the issue they present to the Court, which has a duty to address these claims and answer these questions. Respondents' argument that allowing same-sex couples to wed will harm marriage as an institution rests on a counterintuitive view of opposite-sex couples' decisions about marriage and parenthood. Finally, the First Amendment ensures that religions, those who adhere to religious doctrines, and others have protection as they seek to teach the principles that are so fulfilling and so central to their lives and faiths.

(c) The Fourteenth Amendment requires States to recognize same-sex marriages validly performed out of State. Since same-sex couples may now exercise the fundamental right to marry in all States, there is no lawful basis for a State to refuse to recognize a lawful same-sex marriage performed in another State on the ground of its same-sex character.

Drug Competition Means Big Savings

Joseph Fuhr - June 26, 2015

Competition for some of the priciest drugs may soon be coming to a pharmacy near you. The new development has to do with "biologics," which are drugs produced in living systems such as plant and animal cells or microorganisms.

Biologics treat some of the most serious diseases, and they are typically very expensive. But because of the way they are made, competing drug manufacturers can't precisely replicate them — there's no such thing as a "generic" version of a biologic. There are, however, highly similar substitutes known as "biosimilars." The Biologics Price Competition and Innovation Act, passed in 2010, created a process through which the Food and Drug Administration can approve these drugs.

For the first time, the FDA has done just that, approving Sandoz's Zarzio, which will compete with Amgen's Neupogen, a drug that treats a side effect of chemotherapy. What benefits can consumers expect from this competition? There are lessons in the Hatch-Waxman Act, a 1984 law that essentially did for generics what the new law does for biosimilars.

By 2013, generics accounted for around 86 percent of dispensed retail prescriptions, and it has been estimated that consumers saved over one trillion dollars in the period from 2002 to 2011. In many cases, generic price competition decreased prices by 80 to 90 percent. The law also lowered overall medical costs, since drugs decrease the need for medical services such as emergency-room visits, hospitalization, and operations. Also, when people stay healthier, they miss work less and are more productive on the job.

All this has occurred without innovation suffering. We have seen many new drugs in the last three decades.

To be sure, the market for biosimilars is different in some ways. Since development and manufacturing costs are higher for biosimilars than for generics, biosimilar competition will probably bring smaller price cuts, at least in percentage terms. Based on the European market's early experience — biosimilars have been competing there since 2006 — the savings from competition has been estimated to be 15 to 20 percent.

However, a year's supply of a biologic can cost $100,000, so a 15 to 20 percent price reduction is substantial. A RAND study estimated that savings from biologics over the next decade will be over $44 billion.

With the FDA's first biosimilar approval, the future for bringing lower-cost drugs to patients is very bright. Consumers will see tremendous benefits from biosimilar competition.

Joseph Fuhr is an economics professor at Widener University and senior fellow at the American Consumer Institute.

King v. Burwell: An Excerpt

U.S. Supreme Court - June 25, 2015

Editor's note: The following is an excerpt from the syllabus of King v. Burwell, outlining Chief Justice John Roberts's majority opinion. Citations have been removed.

[The Affordable Care Act] requires the creation of an "Exchange" in each State — basically, a marketplace that allows people to compare and purchase insurance plans. The Act gives each State the opportunity to establish its own Exchange, but provides that the Federal Government will establish "such Exchange" if the State does not. Relatedly, the Act provides that tax credits "shall be allowed" for any "applicable taxpayer," but only if the taxpayer has enrolled in an insurance plan through "an Exchange established by the State under [42 U. S. C. §18031]." An IRS regulation interprets that language as making tax credits available on "an Exchange," "regardless of whether the Exchange is established and operated by a State . . . or by HHS."

Petitioners are four individuals who live in Virginia, which has a Federal Exchange. They do not wish to purchase health insurance. In their view, Virginia's Exchange does not qualify as "an Exchange established by the State under [42 U. S. C. §18031]," so they should not receive any tax credits. That would make the cost of buying insurance more than eight percent of petitioners' income, exempting them from the Act's coverage requirement. As a result of the IRS Rule, however, petitioners would receive tax credits. That would make the cost of buying insurance less than eight percent of their income, which would subject them to the Act's coverage requirement.

Petitioners challenged the IRS Rule in Federal District Court. The District Court dismissed the suit, holding that the Act unambiguously made tax credits available to individuals enrolled through a Federal Exchange. The Court of Appeals for the Fourth Circuit affirmed. The Fourth Circuit viewed the Act as ambiguous, and deferred to the IRS's interpretation under Chevron U. S. A. Inc. v. Natural Resources Defense Council, Inc.

Held: Section 36B's tax credits are available to individuals in States that have a Federal Exchange.

(a) When analyzing an agency's interpretation of a statute, this Court often applies the two-step framework announced in Chevron. But Chevron does not provide the appropriate framework here. The tax credits are one of the Act's key reforms and whether they are available on Federal Exchanges is a question of deep "economic and political significance"; had Congress wished to assign that question to an agency, it surely would have done so expressly. And it is especially unlikely that Congress would have delegated this decision to the IRS, which has no expertise in crafting health insurance policy of this sort.

It is instead the Court's task to determine the correct reading of Section 36B. If the statutory language is plain, the Court must enforce it according to its terms. But oftentimes the meaning — or ambiguity — of certain words or phrases may only become evident when placed in context. So when deciding whether the language is plain, the Court must read the words "in their context and with a view to their place in the overall statutory scheme."

(b) When read in context, the phrase "an Exchange established by the State under [42 U. S. C. §18031]" is properly viewed as ambiguous. The phrase may be limited in its reach to State Exchanges. But it could also refer to all Exchanges — both State and Federal — for purposes of the tax credits. If a State chooses not to follow the directive in Section 18031 to establish an Exchange, the Act tells the Secretary of Health and Human Services to establish "such Exchange." And by using the words "such Exchange," the Act indicates that State and Federal Exchanges should be the same. But State and Federal Exchanges would differ in a fundamental way if tax credits were available only on State Exchanges — one type of Exchange would help make insurance more affordable by providing billions of dollars to the States' citizens; the other type of Exchange would not. Several other provisions in the Act — e.g., Section 18031(i)(3)(B)'s requirement that all Exchanges create outreach programs to "distribute fair and impartial information concerning . . . the availability of premium tax credits under section 36B" — would make little sense if tax credits were not available on Federal Exchanges.

The argument that the phrase "established by the State" would be superfluous if Congress meant to extend tax credits to both State and Federal Exchanges is unpersuasive. This Court's "preference for avoiding surplusage constructions is not absolute." And rigorous application of that canon does not seem a particularly useful guide to a fair construction of the Affordable Care Act, which contains more than a few examples of inartful drafting. The Court nevertheless must do its best, "bearing in mind the ‘fundamental canon of statutory construction that the words of a statute must be read in their context and with a view to their place in the overall statutory scheme.'"

(c) Given that the text is ambiguous, the Court must look to the broader structure of the Act to determine whether one of Section 36B's "permissible meanings produces a substantive effect that is compatible with the rest of the law."

Here, the statutory scheme compels the Court to reject petitioners' interpretation because it would destabilize the individual insurance market in any State with a Federal Exchange, and likely create the very "death spirals" that Congress designed the Act to avoid. Under petitioners' reading, the Act would not work in a State with a Federal Exchange. As they see it, one of the Act's three major reforms — the tax credits — would not apply. And a second major reform — the coverage requirement — would not apply in a meaningful way, because so many individuals would be exempt from the requirement without the tax credits. If petitioners are right, therefore, only one of the Act's three major reforms would apply in States with a Federal Exchange.

The combination of no tax credits and an ineffective coverage requirement could well push a State's individual insurance market into a death spiral. It is implausible that Congress meant the Act to operate in this manner. Congress made the guaranteed issue and community rating requirements applicable in every State in the Nation, but those requirements only work when combined with the coverage requirement and tax credits. It thus stands to reason that Congress meant for those provisions to apply in every State as well.

(d) The structure of Section 36B itself also suggests that tax credits are not limited to State Exchanges. Together, Section 36B(a), which allows tax credits for any "applicable taxpayer," and Section 36B(c)(1), which defines that term as someone with a household income between 100 percent and 400 percent of the federal poverty line, appear to make anyone in the specified income range eligible for a tax credit. According to petitioners, however, those provisions are an empty promise in States with a Federal Exchange. In their view, an applicable taxpayer in such a State would be eligible for a tax credit, but the amount of that tax credit would always be zero because of two provisions buried deep within the Tax Code. That argument fails because Congress "does not alter the fundamental details of a regulatory scheme in vague terms or ancillary provisions."

(e) Petitioners' plain-meaning arguments are strong, but the Act's context and structure compel the conclusion that Section 36B allows tax credits for insurance purchased on any Exchange created under the Act. Those credits are necessary for the Federal Exchanges to function like their State Exchange counterparts, and to avoid the type of calamitous result that Congress plainly meant to avoid.

The Amazing Spider-Man Patent Lawsuit

Mytheos Holt - June 25, 2015

This week, the Supreme Court struck a blow against patent abuse. Amusingly, the patent in question was for a species of toy that allows children to roleplay as a "spider-person" — this ambiguous phrasing presumably having been selected to avoid copyright claims — by shooting pressurized foam string, or "web," from wrist-mounted canisters.

In short, it was a patent on toys that enable one to act like Spider-Man. It expired this year after 20 years of being on the books, meaning that anyone could use this design without securing the permission of the patent's holder, Stephen Kimble.

However, Kimble didn't go down without a fight. Long ago, he'd struck a royalty deal with Marvel Entertainment allowing the Spider-Man publisher to make toys with the technology — and the deal did not specify an expiration date. Kimble sued, arguing that, by its own language, the deal should continue even without the patent.

This argument clearly contradicted the Supreme Court's 1964 decision in Brulotte v. Thys Co., which held that licensing agreements are not enforceable once the underlying patents expire. Kimble's case made it all the way to the Supreme Court, which declined to overturn Brulotte. Justice Elena Kagan's majority opinion was peppered with Spider-Man references.

It is fortunate that the Court refused to remove one of the few obstacles it has put in the way of interminable patent litigation. However, not every victim of patent abuse will be so lucky. And there are many.

This Monday alone, nearly 70 cases were filed by known patent trolls in U.S. courts. Twenty-two more followed this Tuesday. Their targets are a Who’s Who of famous technology companies, including computer manufacturers such as Acer, ASUS, Dell, and HP. Blackberry, Microsoft, and Nokia also appear in the filings. The plaintiffs, meanwhile, are almost uniformly non-entities who do not seem to produce much other than their lawsuits.

This alone does not prove that there is anything malevolent happening; after all, big companies are just as capable of infringing as anyone else. But many individual cases are ridiculous. For instance, one case against Dell involves a patent with the following almost unfathomably vague abstract:

An operator controlled interactive communication device having a display for receiving or displaying messages internally generated and received from external sources. A communication transmission interface which is selectively connected to a telephone handset connector, a computer connector and a modem to allow multiple modes of communication between an operator at a customer site and a vendor site. The communication device is reprogrammable from a remote location or through the computer connector.

Someone patent the technology for translating this into English, stat, because there is clearly a market need for it.

Needless to say, the above language (which is echoed in the patent's more technical, legally enforceable claims) could apply to countless devices. And if Cypaleo, LLC, the plaintiff in this case, had manufactured such devices or was trying to prevent someone from stealing technology the company actually wanted to produce, that would be one thing, but there is no evidence that Cypaleo has done anything beyond filing lawsuits. In fact, this Monday alone, it produced seven, all against companies with the resources to pay the sorts of extortionate settlement costs that patent trolls attempt to extort.

Let’s be clear: Cypaleo and companies like it are not innovators. They aren’t even speculators. They’re parasites who latch on to larger companies and abuse the intellectual-property system to suck cash from them.

Worse, their trolling does real damage to actual innovators who can’t afford a five-star legal team. True, Microsoft might be able to afford to buy off a litigious tick, but what happens when the guy tinkering in his garage manages to build something for which a troll claims to already "own" the patent despite never having any illusions that it could be built?

This is the state of our legal system. And while we should applaud Justice Kagan’s decision in the Spider-Man case, this is not a state of affairs that the Supreme Court can or should bear the responsibility of fixing. Rather, it’s time Congress took up the reins, passed patent reform, and stopped letting the patent trolls fire their rent-seeking missiles at businesses and innovators.

Mytheos Holt is an associate policy analyst with the R Street Institute.

Gun Laws: U.S. vs. the Rest of the World

John Donohue, The Conversation - June 25, 2015

The Charleston murders have renewed the sporadic debates over whether gun control might have prevented this latest of tragedies.

To quote President Obama the day after the shooting in the AME Church,

At some point, we as a country will have to reckon with the fact that this kind of mass violence does not happen in other advanced countries. It doesn't happen in other places with this kind of frequency. It is in our power to do something about it.

So far, however, the US has not done "something about it."

The National Rifle Association (NRA), it seems, has so much power over politicians that even when 90% of Americans (including a majority of NRA members) wanted universal background checks to be adopted following the Newtown killings of 2012, no federal action ensued. Certainly, it's unlikely that any useful legislation will emerge in South Carolina.

The NRA stranglehold on appropriate anti-crime measures is only part of the problem, though.

The gun culture's worship of the magical protective capacities of guns and their power to be wielded against perceived enemies — including the federal government — is a message that resonates with troubled individuals from the Santa Barbara killer, who was seeking vengeance on women who had failed to perceive his greatness, to the Charleston killer who echoed the Tea Party mantra of taking back our country.

I've been researching gun violence — and what can be done to prevent it — in the US for 25 years. The fact is that if NRA claims about the efficacy of guns in reducing crime were true, the US would have the lowest homicide rate among industrialized nations instead of the highest homicide rate (by a wide margin).

The US is by far the world leader in the number of guns in civilian hands. The stricter gun laws of other "advanced countries" have restrained homicidal violence, suicides and gun accidents — even when, in some cases, laws were introduced over massive protests from their armed citizens.

The State of Gun Control in the U.S.
Eighteen states in the US and a number of cities including Chicago, New York and San Francisco have tried to reduce the unlawful use of guns as well as gun accidents by adopting laws to keep guns safely stored when they are not in use. Safe storage is a common form of gun regulation in nations with stricter gun regulations.

The NRA has been battling such laws for years. But that effort was dealt a blow earlier this month when the US Supreme Court — over a strident dissent by Justices Thomas and Scalia — refused to consider the San Francisco law that required guns not in use be stored safely. This was undoubtedly a positive step because hundreds of thousands of guns are stolen every year, and good public policy must try to keep guns out of the hands of criminals and children.

The dissenters, however, were alarmed by the thought that a gun stored in a safe would not be immediately available for use, but they seemed unaware of how unusual it is that a gun is helpful when someone is under attack.

For starters, only the tiniest fraction of victims of violent crime are able to use a gun in their defense. Over the period from 2007-2011, when roughly six million nonfatal violent crimes occurred each year, data from the National Crime Victimization Survey show that the victim did not defend with a gun in 99.2% of these incidents — this in a country with 300 million guns in civilian hands.

In fact, a study of 198 cases of unwanted entry into occupied single-family dwellings in Atlanta (not limited to night when the residents were sleeping) found that the invader was twice as likely to obtain the victim's gun than to have the victim use a firearm in self-defense.

The author of the study, Arthur Kellerman, concluded in words that Justice Thomas and Scalia might well heed:

On average, the gun that represents the greatest threat is the one that is kept loaded and readily available in a bedside drawer.

A loaded, unsecured gun in the home is like an insurance policy that fails to deliver at least 95% of the time you need it, but has the constant potential — particularly in the case of handguns that are more easily manipulated by children and more attractive for use in crime — to harm someone in the home or (via theft) the public at large.

More Guns Won't Stop Gun Violence
For years, the NRA mantra has been that allowing citizens to carry concealed handguns would reduce crime as they fought off or scared off the criminals.

Some early studies even purported to show that so-called right to carry laws (RTC) did just that, but a 2004 report from the National Research Council refuted that claim (saying it was not supported by "the scientific evidence"), while remaining uncertain about what the true impact of RTC laws was.

Ten years of additional data have allowed new research to get a better fix on this question, which is important since the NRA is pushing for a Supreme Court decision that would allow RTC as a matter of constitutional law.

The new research on this issue from my research team at Stanford University has given the most compelling evidence to date that RTC laws are associated with significant increases in violent crime — particularly for aggravated assault. Looking at Uniform Crime Reports data from 1979-2012, we find that, on average, the 33 states that adopted RTC laws over this period experienced violent crime rates that are 4%-19% higher after 10 years than if they had not adopted these laws.

This hardly makes a strong case for RTC as a constitutional right. At the very least more research is needed to estimate more precisely exactly how much violent crime such a decision would unleash in the states that have so far resisted the NRA-backed RTC laws.

In the meantime, can anything make American politicians listen to the preferences of the 90% on the wisdom of adopting universal background checks for gun purchases?

The Conversation

Gun Control Around the World
As an academic exercise, one might speculate whether law could play a constructive role in reducing the number or deadliness of mass shootings.

Most other advanced nations apparently think so, since they make it far harder for someone like the Charleston killer to get his hands on a Glock semiautomatic handgun or any other kind of firearm (universal background checks are common features of gun regulation in other developed countries).

• Germany: To buy a gun, anyone under the age of 25 has to pass a psychiatric evaluation (presumably 21-year-old Dylann Roof would have failed).

• Finland: Handgun license applicants are only allowed to purchase firearms if they can prove they are active members of regulated shooting clubs. Before they can get a gun, applicants must pass an aptitude test, submit to a police interview, and show they have a proper gun storage unit.

• Italy: To secure a gun permit, one must establish a genuine reason to possess a firearm and pass a background check considering both criminal and mental health records (again, presumably Dylann Roof would have failed).

• France: Firearms applicants must have no criminal record and pass a background check that considers the reason for the gun purchase and evaluates the criminal, mental, and health records of the applicant. (Dylann Roof would presumably have failed in this process).

• United Kingdom and Japan: Handguns are illegal for private citizens.

While mass shootings as well as gun homicides and suicides are not unknown in these countries, the overall rates are substantially higher in the United States than in these competitor nations.

While NRA supporters frequently challenge me on these statistics saying that this is only because "American blacks are so violent," it is important to note that white murder rates in the US are well over twice as high as the murder rates in any of these other countries.

Australia Hasn't Had a Mass Shooting Since 1996
The story of Australia, which had 13 mass shootings in the 18-year period from 1979 to 1996 but none in the succeeding 19 years, is worth examining.

The turning point was the 1996 Port Arthur massacre in Tasmania, in which a gunman killed 35 individuals using semiautomatic weapons.

In the wake of the massacre, the conservative federal government succeeded in implementing tough new gun control laws throughout the country. A large array of weapons were banned — including the Glock semiautomatic handgun used in the Charleston shootings. The government also imposed a mandatory gun buy back that substantially reduced gun possession in Australia.

The effect was that both gun suicides and homicides (as well as total suicides and homicides) fell. In addition, the 1996 legislation made it a crime to use firearms in self-defense.

When I mention this to disbelieving NRA supporters they insist that crime must now be rampant in Australia. In fact, the Australian murder rate has fallen to close one per 100,000 while the US rate, thankfully lower than in the early 1990s, is still roughly at 4.5 per 100,000 — over four times as high. Moreover, robberies in Australia occur at only about half the rate of the US (58 in Australia versus 113.1 per 100,000 in the US in 2012).

How did Australia do it? Politically, it took a brave prime minister to face the rage of Australian gun interests.

John Howard wore a bullet-proof vest when he announced the proposed gun restrictions in June 1996. The deputy prime minister was hung in effigy. But Australia did not have a domestic gun industry to oppose the new measures so the will of the people was allowed to emerge. And today, support for the safer, gun-restricted Australia is so strong that going back would not be tolerated by the public.

That Australia hasn't had a mass shooting since 1996 is likely more than merely the result of the considerable reduction in guns — it's certainly not the case that guns have disappeared altogether.

I suspect that the country has also experienced a cultural shift between the shock of the Port Arthur massacre and the removal of guns from every day life as they are no longer available for self-defense and they are simply less present throughout the country. Troubled individuals, in other words, are not constantly being reminded that guns are a means to address their alleged grievances to the extent that they were in the past, or continue to be in the US.

Lax Gun Control in One Nation Can Create Problems in Another
Of course, strict gun regulations cannot ensure that the danger of mass shootings or killings has been eliminated.

Norway has strong gun control and committed humane values. But they didn't prevent Anders Breivik from opening fire on a youth camp on the island of Utoya in 2011? His clean criminal record and hunting license had allowed him to secure semiautomatic rifles, but Norway restricted his ability to get high-capacity clips for them. In his manifesto, Breivik wrote about his attempts to legally buy weapons, stating, "I envy our European American brothers as the gun laws in Europe sucks ass in comparison."

In fact, in the same manifesto ("December and January — Rifle/gun accessories purchased"), Breivik wrote that it was from a US supplier that he purchased — and had mailed — ten 30-round ammunition magazines for the rifle he used in his attack.

In other words, even if a particular state chooses to make it harder for some would-be killers to get their weapons, these efforts can be undercut by the jurisdictions that hold out from these efforts. In the US, of course, gun control measures at the state and local level are often thwarted by the lax attitude to gun acquisition in other states.

John Donohue
is C Wendell and Edith M Carlsmith Professor of Law at Stanford University. This article was originally published on The Conversation. Read the original article.

Buying a Gun While Clutching a Syringe

Robert VerBruggen - June 23, 2015

David Frum has this to say:

A convicted felon clutching a syringe and ranting about his dishonorable discharge can enter a gun dealer's premises and — so long as his name does not appear in a database — the seller remains legally immune no matter how much objective warning he had that his customer was a prohibited possessor. Under the 2005 federal Protection of Lawful Commerce in Arms Act and similar state laws, vendors can generally be held liable for a sale only if they can be shown to have had affirmative knowledge that the gun buyer intended to use the weapon to commit a crime.

One of these days, Frum will actually read the Protection of Lawful Commerce in Arms Act. Probably not any day soon, though, seeing as I pointed out to him he had a different part of the law wrong two years ago.

The idea behind the law is pretty simple: If gun manufacturers and sellers do their business responsibly, and yet a gun ends up being used in a crime, the manufacturers and sellers shouldn't be held liable. Of course, because manufacturers and sellers sometimes aren't responsible — they make defective products, they sell to people they shouldn't — the law lays out a series of exceptions.

One exception kicks in for "an action in which a manufacturer or seller of a qualified product knowingly violated a State or Federal statute applicable to the sale or marketing of the product, and the violation was a proximate cause of the harm for which relief is sought." It is illegal for any person — a dealer or anyone else — "to sell ... any firearm or ammunition to any person knowing or having reasonable cause to believe [emphasis added] that such person ... is an unlawful user of or addicted to any controlled substance ... [or] has been discharged from the Armed Forces under dishonorable conditions." And beyond the liability, breaking this law can get you ten years.

Another exception is for lawsuits alleging "negligent entrustment," defined in the law as "the supplying of a qualified product by a seller for use by another person when the seller knows, or reasonably should know, the person to whom the product is supplied is likely to, and does, use the product in a manner involving unreasonable risk of physical injury to the person or others." That would be another avenue for a lawsuit. (It's the same provision the families of some Sandy Hook victims are using to sue Bushmaster, though their case is much weaker.)

So, no, a dealer is not immune from liability (or imprisonment) if he sells a gun to someone who's holding a syringe and ranting about his dishonorable discharge.

Robert VerBruggen is editor of RealClearPolicy. Twitter: @RAVerBruggen

Robert VerBruggen - June 23, 2015

Australia tends to come up whenever the gun-control debate takes central stage. Following a 1996 mass shooting, the country immediately enacted incredibly strict anti-gun laws, including the forced buyback (from October of 1996 through September of 1997) of many weapons already in circulation.

What happened next? A number of studies have taken a look, and Dylan Matthews of Vox provides a pretty balanced summary, concluding that the effort reduced suicides and may have reduced homicides as well. I always find it helpful to keep the basic trendlines in mind when considering research like this, so here they are.

First, some homicide rates from the Australian government (collected by financial years, which change over on July 1):

It's obvious why studies don't make bold claims here: There was a drop around the time of the buyback — actually beginning the year before — but it was pretty small until the mid-2000s, long after the program was over. (In fairness, there was another, smaller buyback in 2003.) And a different data set counting murder and manslaughter victims, also from the Australian government, doesn't show a drop in the mid-1990s at all. So it's very possible that these aggressive gun-control measures did nothing at all to prevent people from killing each other.

The case is a little easier to make with suicide — as it usually is. Guns can deter homicide in addition to enabling it, making the overall effect difficult to tease out, but it's hard to imagine a gun preventing a suicide. (For a solid introduction to the topic of guns and suicide, I recommend the chapter on it from the National Academies' 2004 gun-violence report.)

Here are the government's numbers:

The suicide rate began falling after the buyback, though it did so slowly and the trend continued long after the effort had finished. It's not crazy to suggest that the two had something to do with each other, especially given some of the corroborating evidence Matthews has also discussed. For example, areas that bought back more guns saw steeper drops in gun suicides.

Of course, whether it's acceptable to force people to surrender their guns on the off chance it'll stop them from harming themselves — for Australian men, suicide was less than a 0.025 percent annual risk at the time of the buyback, and it remained above 0.015 percent in 2013 — is another question entirely.

Robert VerBruggen is editor of RealClearPolicy. Twitter: @RAVerBruggen

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