Having quickly read the D.C. Circuit’s ObamaCare decision that came down this morning upholding the statute’s individual mandate, I’m struck by this line from Judge Laurence Silberman’s majority opinion:

No Supreme Court case has ever held or implied that Congress’s Commerce Clause authority is limited to individuals who are presently engaging in an activity involving, or substantially affecting, interstate commerce.

I should think that in a free society, living under a Constitution of enumerated and thus limited powers, that the point should be stated precisely the other way around, namely:

No Supreme Court case has ever held or implied that Congress’s Commerce Clause authority reaches individuals who are not presently engaging in an activity involving, or substantially affecting, interstate commerce.

In other words, is America’s fundamental political principle “everything that is not given (to the government) is retained,” or is it rather “everything that is not retained is given”? What is the presumption, and who has the burden of proof? Since the New Deal Court’s “constitutional revolution,” of course, we’ve lived, unfortunately, under the latter, and paid the price.

Today the D.C. Circuit ruled that the individual mandate is a constitutional exercise of federal power under the Commerce Clause. Senior Judge Laurence Silberman (Reagan appointee) wrote the opinion, which was joined by Senior Judge Harry Edwards (Carter appointee). Judge Brett Kavanaugh (George W. Bush appointee) dissented on jurisdictional grounds without reaching the merits, finding that the Anti-Injunction Act barred the suit until the individual mandate/​penalty/​tax goes into effect. (The case is Seven-Sky v. Holder; see Cato’s amicus brief and a quick breakdown by Tim Sandefur.)

Sure, this is a loss for our side but it’s not a big deal. Every development in the Obamacare litigation has been anticlimactic since the Eleventh Circuit split with the Sixth, guaranteeing that the Supreme Court would take the case. Today’s ruling, therefore, is notable not so much for its result — upholding the individual mandate — as for the reluctance with which it reached it. 

After acknowledging the novelty of the power Congress is asserting, the court expressed concern at “the Government’s failure to advance any clear doctrinal principles limiting congressional mandates that any American purchase any product or service in interstate commerce.” In other words, the majority saw itself bound by the Supreme Court’s broad reading of federal power under the Commerce Clause but felt “discomfort” at reaching a result that seemingly had no bounds. 

Indeed, the government has yet to tell any court in any of the cases what it cannot do under the guise of regulating interstate commerce. But rest assured that the Supreme Court will ask again, and soon — it considers the myriad cert petitions later this week. And if the high court is as unsatisfied with the government’s jurisprudential non-theory as the D.C. Circuit was, it will not hesitate to strike down this expansion of federal power. 

“Federalism is more than an exercise in setting the boundary between different institutions of government for their own integrity,” wrote Justice Kennedy for a unanimous Court last term (United States v. Bond). “Federalism secures the freedom of the individual.” 

I am confident that the Supreme Court will not allow this unprecedented invasion of individual liberty.

Last week I offered a few proposals to help move along the housing market. Given the need for brevity, the rationales for each were short. As almost all of them were counter to the conventional wisdom, they do merit a little more explaining, in particular the suggestion to raise interest rates.

Before I could offer a further discussion of the fact that the mortgage market is driven by both demand and supply, Daniel Indiviglio at the Atlantic was quick enough to provide much of that detail. Rather than repeat his analysis here, which I agree with, let’s focus on a few other points.

David argues that “at rates like 4 percent, those loans had better be pristine if the bank wants to ensure that its default risk is covered by the small amount of interest it receives.” Let’s dig a little deeper. What lenders care about are real rates. With inflation running approximately 2 percent, the real return on a prime mortgage today, before credit cost, is around 2 percent. But today about 3.5 percent of prime loans are in foreclosure. Assuming a 50 percent recovery rate, 1.75 percent is needed to cover credit losses. Even in good times, prime loans foreclosure at about a 0.6 percent rate. With subprime foreclosures running about 14 percent, you’d need to charge at least 9 percent to break-even in real terms. At today’s rates, lenders are barely breaking even on prime loans, they’d bleed money if they charge similar rates to subprime borrowers.

But then why don’t lenders just charge higher rates for the higher risk borrowers? After all that’s what they did during the bubble years. Well a lot has changed since then. For instance, in 2008 the Federal Reserve, under the Home Ownership and Equity Protection Act (HOEPA), lowered the threshold for what is considered a “higher-cost” mortgage, from treasury +8 percent, which excluded much of the market, to prime mortgage +1.5 percent, which under current rates makes anything over 5.5 percent a “high cost” mortgage. When Congress passed HOEPA in 1994, it shut down that segment of the market, due to what is tremendous litigation risk. Now the Fed’s extension of HOEPA has done the same for much of the mortgage market. According to the Fed, 22 percent of the market was “higher-cost” in 2005. After the new regulation, that share had fallen to 2.4 percent in 2010. Yes the housing bubble and credit crisis would have shrunk that market, but by almost 90 percent? And yes, many of those loans we didn’t want to come back, but many we did.

The point here is that the Fed actually does impose, via legal risk, a de facto ceiling on mortgage rates. If we want to bring back housing/​mortgage demand among higher risk borrowers, which were a significant source of demand, then the Fed would be wise to suspend its current HOEPA rules. If we don’t want to bring that demand back, then fine, just stop complaining about a weak housing market. As an aside, I was of the view in 2008 and still today that the Fed lacked legal authority for its 2008 HOEPA rule, but then the Fed has rarely let a lack of legal authority get in its way.

President Obama claims to support America’s exporting and so-called “green jobs” industries, but he also likes rules that restrict the importation of critical inputs to those industries. Austin Bragg and I produced a short video detailing how antidumping duties serve to nudge American manufacturers offshore or out of business. The examples we cite are American manufactured products that fall squarely into the category of “green.”

Facebook it. Tweet it. And read more of Dan Ikenson’s heavy lifting on the antidumping issue here, here and here.

Two weeks ago, a new bill called the Stop Online Piracy Act was introduced in the House. The bill has attracted criticism from a wide variety of libertarian thinkers. In this post I’ll highlight three of the most compelling responses.

First, at Ars Technica, I interviewed Ryan Radia of the Competitive Enterprise Institute, who argues that SOPA threatens to undermine the legal “safe harbor” that protect sites like YouTube and Flickr from liability for the actions of their users.

Supporters of SOPA say it’s needed to combat “rogue” websites hosted overseas. Such rogue sites deliver infringing content to American consumers while remaining out of reach of American law enforcement. But Radia argues that supporters of the bill are being disingenuous when they claim the bill only targets rogue sites:

“The bill is written in a way that covers a far broader category of sites” than ordinary “rogue” websites, Radia told Ars. “I think this is intentional.”

“Many of the companies that have long wished that the DMCA imposed a greater obligation on online intermediaries to act against infringement see this bill as an effective means of accomplishing their end goals without opening the can of worms of revisiting the DMCA safe harbor,” he said.

Radia pointed out that “it’s entirely possible that an intermediary that is protected by the DMCA safe harbor could also fit within the category of sites dedicated to infringement.” So companies that build websites based on the rules of the DMCA might suddenly find themselves on shaky legal ground.

Radia notes that the legislation is broadly unpopular in the venture capital community and warns that the uncertainty it would introduce could chill high-tech investment.

Also today on Time’s website, the Mercatus Center’s Jerry Brito argues that SOPA is a “cure worse than the disease.” He focuses on a provision that allows the government to create a blacklist of alleged rogue websites and compel ISPs to remove them from their domain name servers:

At a moment when Secretary of State Hillary Clinton is urging world governments to keep their hands off the Internet, creating a blacklist would send the wrong message. And not just to China or Iran, which already engage in DNS filtering, but to liberal democracies that might want to block information they find naughty. Imagine if the U.K. created a blacklist of American newspapers that its courts found violated celebrities’ privacy? Or what if France blocked American sites it believed contained hate speech? We forget, but those countries don’t have a First Amendment.

The result could be a virtually broken Internet where some sites exist for half the world and not for the other. The alternative is to leave the DNS alone and focus (as the bills also do) on going after the cash flow of rogue websites. As frustrating as it must be for the content owners who are getting ripped off, there are some cures worse than the disease.

Finally, at CNet Larry Downes of Tech Freedom calls SOPA “Hollywood’s latest effort to turn back time.”

Larry, Jerry, and Ryan all believe that some kind of “rogue sites” legislation is necessary. I’m not so sure; I think Congress struck the right balance when it created the DMCA’s safe harbor in 1998. But either way, we’re all concerned about the detrimental effects that SOPA—and its Senate companion legislation known as the PROTECT IP Act—will have on Internet freedom.

The Pew Research Center released a study today on the growing “age gap” in economic well-being. Based largely on Census’ Survey of Income and Program Participation, the study compares household income trends, by age, from 1984 to 2009.

The main result is that those households headed by someone 65 and older did pretty well for themselves, while those under 35 did pretty badly. The number one driver of this trend? The housing bubble. Seems the elderly, in general, purchased long before the bubble and didn’t take a lot of equity out, while the young bought near the peak and took a bath.

The paper’s results suggest two policies messages to me (perhaps it will suggest different ones to you): given how well most of the elderly have done, relative to younger households, where’s the justice or even need for the young to continue to subsidize the elderly via medicare, social security, etc. These trends in wealth provides considerable justification for means-testing these programs. Secondly the Federal Reserve’s constant attempt to make us wealthier via a series of asset bubbles is actually adding to income inequality. Asset booms make those with assets, usually older and wealthier households, even more wealthy while doing little or even real harm to those without assets. If you really want to see more equal wealth, then demand that the government stop trying to push up home prices.

Of course there are other factors that also drive the difference in age wealth trends. Recall the data is for households, so the declining household size (rise of single parents, delay of marriage) will generate difference across cohorts.

Yesterday’s presidential election in Nicaragua that resulted in the reelection of Daniel Ortega was marred by widespread accounts of fraud and voter intimidation. Observers from the European Union called the process “less than transparent.” And election monitors from the Organization of American States (OAS) say they were prevented from visiting polling stations. Not to mention that Ortega’s candidacy was blatantly illegal: Nicaragua’s Constitution prevents a president from running for a consecutive term. By manipulating the country’s Supreme Court and Electoral Council, Ortega ran and won anyway.

However, according to José Miguel Insulza, the Secretary General of the OAS, “In Nicaragua democracy and peace moved forward.” [in Spanish]

Insulza has a record of keeping silent or tacitly supporting the region’s autocratic regimes as they violate democratic institutions and human rights. Do we need further proof that José Miguel Insulza is a pawn of Hugo Chávez and his authoritarian allies in Latin America?