I’m fond of saying that lawsuits don’t proceed at Internet speed — meaning that people are disappointed when I tell them that a new constitutional challenge to uphold property rights or free speech or individual liberty generally will take years to get through the courts, or that we’ll have to wait several months for a court to issue an opinion in some front-page case. But lately it does seem that developments from the ongoing legal challenges to Obamacare are coming faster and faster, as if the train has now left the station and, to badly mix metaphors, it’s snowballing to an eventual collision at the Supreme Court.

That “gaining speed” phenomenon is mainly coincidence — given the more than 20 Obamacare lawsuits out there, briefing schedules, hearings, and rulings are bound to overlap at some point — but it has been interesting to compare and contrast the events of the last 10 days. To recap some of the high points, this summer Judge Henry Hudson denied the government’s motion to dismiss Virginia’s law suit (read my comments here and Cato’s brief here). Then two weeks ago, Judge George Steeh granted a similar motion in a case brought by the Thomas More Law Center in Michigan — in a cursory opinion I react to here and critique in this op-ed.

Last Thursday, Judge Roger Vinson issued a 65-page opinion allowing most of the lawsuit brought by 20 states, the National Federation of Independent Business, and two individuals to proceed (my reaction here). This is an important ruling spelling out the unprecedented nature of the power Congress purports to assert here, with the individual mandate of course but also in potentially commandeering state officials and coercing them with strings attached to Medicaid funds and other regulatory burdens.

Finally, yesterday Judge Hudson held a hearing in Richmond on the parties’ cross-motions for summary judgment — which means both sides agree that no material facts are in dispute and the court should go ahead and rule on the law without having a trial. (Cato filed a brief for this stage of proceedings as well.) By all accounts, the hearing went well for Virginia; Judge Hudson was skeptical of the government’s argument that individual decisions not to enter the insurance marketplace was the sort of “local economic activity that has a substantial effect on interstate commerce” that the Supreme Court has said marks the outer bounds of Congress’s power under the Commerce Clause. The judge also indicated that he would issue an opinion by the end of the year.

This is all heartening news — the courts that are seriously grappling with these lawsuits (and especially the highest profile cases brought by the 21 states) actually think the Constitution places limits on federal power. Then again, I can’t believe that question is even up for discussion! Stay tuned — and keep track of all the lawsuits at health​carelaw​suits​.org.

The public is concerned that governments are providing excessively generous compensation to their workers. Attention has focused on the high salaries and benefits of federal civilian employees and the often lavish pensions paid to state and local workers.

The compensation policies of the Federal Reserve System also deserve scrutiny. The chart compares average wages of workers in the U.S. private sector and workers in the 12 Federal Reserve Banks. In recent years, the average wage in the Fed’s regional banks has soared, reaching $84,054 in 2009, or 67 percent greater than the private sector average wage of $50,462. Meanwhile, the average wage of the 2,100 workers in the Fed’s Board of Governors in Washington reached $116,030 in 2009. (Federal Reserve Bank data is from this annual report table. Private sector pay is from the BEA, as discussed here).

However, there is a major caveat to this Federal Reserve Bank data. Bank employment has fallen from a stable level before 2002 of about 23,000 to just 17,398 in 2009. One reason is that a major Fed activity—check processing—is rapidly declining due to technological changes. Thus, it is likely that many lost Fed jobs were at relatively lower salary levels.

Nonetheless, despite a 26 percent workforce reduction since 1995, overall Fed Bank compensation costs (wages and benefits) have grown just as fast as the overall economy. Fed compensation costs doubled between 1995 and 2009 as U.S. GDP doubled. The Fed’s total current operating expenses—including compensation, buildings, etc—also doubled during this period. (The Fed’s expenses are from this table in its annual reports. I excluded the new “interest on reserves” expense).

In 2009, total average wages and benefits of Fed Bank workers was $124,974, or more than double the $61,051 average compensation in the U.S. private sector. Fed workers have very generous benefits, including rare perks such as subsidized cafeteria meals.

Let’s look at top end of the Fed’s workforce. In 2009, the average salary of the Fed’s 12 regional presidents was $340,323. In addition, there were 1,183 “officers” in the Fed Bank system with an average salary of $198,960, which is up 94 percent from the average officer salary in 1995.

Also note that the number of these high-paid “officers” in the 12 Fed Banks increased 25 percent between 1995 and 2009 (950 to 1,183), even as the number of overall Fed employees fell 26 percent, as noted. The system is thus becoming very top-heavy.

Federal Reserve annual reports are available online back to 1995. But a 1996 report from the Government Accountability Office discussed the fairly rapid rise in Fed operating expenses during the 1988 to 1994 period, thus indicating that rising costs have been an issue for some time.

How does this affect the general public? Rising costs result in fewer central bank profits being transferred to the U.S. Treasury. That means higher federal deficits or taxes. The GAO explains:

“The Federal Reserve is a self-financing entity that deducts its expenses from its revenues and transfers the remaining amounts to the U.S. Treasury. Because an additional dollar of Federal Reserve cost is an additional dollar of lost federal revenue, the costs of operating the Federal Reserve System are borne by U.S. taxpayers just like the costs of any federal agency.”

As a monopoly immune from competition, the Fed will tend to have a bloated bureaucracy. That makes oversight by Congress very important so that technological efficiencies gained in Fed functions such as check-clearing are passed along to taxpayers, and not gobbled up, for example, by rising numbers of high-paid officers. As the Congress next year looks for ways to reduce the budget deficit, it should look for cost savings at the Fed.

Policymakers might consider whether the Fed really needs 12 regional bank organizations, each with huge fortress-like buildings in cities across the nation. They should ask why the number of high-paid “officers” has increased, even as the number of overall Fed workers has fallen. And they should ask whether Fed employees really need such generous benefit packages—including, for example, both a defined contribution and a defined benefit plan.

I’m not convinced that we need a monopoly central bank. But until policymakers explore alternatives such as free banking, they should try to reduce costs at the Fed as they scour the entire budget for savings. 

(Assistance was provided by intern Michael Nicolini).

Kaiser Health News and The Washington Post have posted a piece titled “Campaign Claims: Health Law Myths And Facts,” which examines these common criticisms of ObamaCare:

1. “The law amounts to a ‘government takeover’ of health insurance and health care.” The article’s conclusion: “it falls far short of a government takeover.” That conclusion rests largely on the fact that “Medical care will be provided by private hospitals and doctors.” But as I explain in this study, “it is irrelevant whether we describe medical resources (e.g., hospitals, employees) as ‘public’ or ‘private.’ What matters—what determines real as opposed to nominal ownership—is who controls the resources.” Obama health official Jeanne Lambrew acknowledges as much: “the government role in socialized medicine systems [can include] public financing of private insurance and providers.” And as I concluded in this study, “Compulsory ‘private’ health insurance would give government as much control over the nation’s health care sector as a compulsory government program.” I wonder if the article’s authors spoke to anyone who raised this perspective.
2. “The law will gut Medicare by cutting more than $500 billion from the program over 10 years; seniors will lose benefits and won’t be able to keep their doctors.” Conclusion: “The gutting of Medicare claim goes too far…What this means for seniors is a bit murkier.” True enough: even if ObamaCare’s implausible Medicare cuts take effect, they clearly would not “gut” Medicare. (BTW, click here or here for a politically sustainable way to restrain Medicare spending.) The authors also note that Medicare Advantage enrollees would lose some benefits. But when the article claims that ObamaCare will not eliminate any “basic” Medicare benefits, it neglects to mention that Medicare’s chief actuary estimates that the law could cause 15 percent of hospitals, home health agencies, and other providers to stop accepting Medicare patients. If your hospital no longer accepts your Medicare coverage, is that not a benefit cut?
3. “The law will cause 87 million Americans to lose their current coverage.” Conclusion: “How true is it? Partly, at best. But evidence is limited.” The House Republicans’ Pledge to America claims that ObamaCare “will force some 87 million Americans to drop their current coverage.” The word drop is a bit strong; it’s more accurate to say that many Americans will have to switch to another plan, even if it’s just a more-expensive version of their current plan. Indeed, HHS estimates that 69 percent of employer plans will have to do so by 2013. Yet some people are being dropped from their current health insurance. When Principal Financial Group leaves the market, its nearly 1 million enrollees will lose their current health plan. Industry analysts expect more such departures. Why no mention of that?
4. “The law is driving up costs and premiums and will continue to do so over the next several years.” Conclusion: “There may be very small increases initially.” Here the article is kinder to ObamaCare than even ObamaCare’s supporters are. May be? Even ObamaCare’s supporters admit the law will increase premiums for some people. Very small increases? Even HHS estimates that the requirement that consumers purchase unlimited annual coverage could increase premiums for some by 7 percent. (There’s no mention of Blue Cross and Blue Shield of Connecticut, which says ObamaCare will increase premiums for some of its customers by nearly 30 percent.) And why only initially? Do the authors expect that there will be no premium increases when HHS eventually stops issuing waivers? Or when HHS sets a minimum level of coverage that Americans must purchase in 2014? Or that ObamaCare has solved the tragedy of the commons? For support, the article claims, “the Obama administration, citing [various] estimates…says the law isn’t responsible for any increase greater than 1 to 2 percent.” Actually, that’s not what the administration says — it’s what they want you to think they’re saying. Read this letter and other administration utterances carefully. They say “1–2 percent” when speaking of ObamaCare’s average effect on premiums, and “minimal” when speaking of anything other than the average effect. (The administration’s threshold for “minimal” is presumably somewhere north of 7 percent.)
5. “The law’s expansion of Medicaid will put massive pressure on state budgets at a time when many are already in crisis.” Conclusion: “The impact will probably be small, but it’s hard to say for sure.” The article only cites figures generated by supporters of the law, who say the impact will be small. Why just mention that there are figures from the other side? Why not include them?
6. “The new law uses tax dollars to pay for abortions.” Conclusion: “Open to interpretation.” This was a missed opportunity to examine two crucial questions. First, would federal insurance subsidies truly be segregated from the separate premiums that consumers in ObamaCare’s exchanges would have to pay for elective-abortion coverage? Or would this just be an accounting gimmick? What would happen, for example, if there were more abortions than an insurer anticipated, and those separate premiums proved insufficient to pay for them? How would you keep one side of the ledger from spilling over into the other? Second, would the availability of federal subsidies for health insurance plans that make elective-abortion coverage available as a rider increase enrollment in those plans? If so, wouldn’t that implicitly subsidize elective abortions? Rather than examine those questions, the article punted.

On the whole, I’d say this fact check may have been very kind to the new law.

What do you do when you’re asked your opinion about how to implement something you don’t like? Do you use the opportunity to say why you think implementation will fail, and how to minimize the damage, even if doing so might make you look like a collaborator? Or do you say nothing and just let bad stuff happen?

A couple of months ago, I was presented with that dilemma by the people at the Thomas B. Fordham Institute — you might have seen me discuss them once or twice — who were putting together a report on how to govern national standards and tests. They asked me, along with several other people who’d thought long and hard about national standards, to send them answers to several questions to help inform their thinking. Today, Fordham is releasing that report, and I have just a few notes about it.

First, you will see me quoted twice in the paper, and from those quotes you could get the impression that I’ve gone all Vichy on national standards. I don’t think Fordham authors Chester Finn and Michael Petrilli intended to do that, nor do the context of the quotes necessarily support that conclusion, but one could get that impression nonetheless. Fortunately, Fordham kindly posted my entire questionnaire – as well as those of several other respondents — on the report’s Web page, and you can go there for my complete thoughts. If you don’t want to do that, though, I’ll summarize (stop me if you’ve heard this before): As long as government runs and funds schools rather than giving parents control of education money and educators full freedom, standards-and-accountability regimes, no matter how strong they start off, will ultimately be rendered meaningless by politics.

My second note is that the overall report is aggravating because it is impossible to concretely discuss the governance of standards that almost no one knows about, and accountability systems that don’t exist. The Fordham authors acknowledge this problem, but acknowledging it doesn’t make it any less enervating. It also highlights that we’ve skipped a critical, much more fundamental debate: Even if you think centralized standards are a good idea — and almost everything we know about markets, competition, and innovation says they aren’t — how do you, really, keep politics from gutting standards and accountability? It’s a debate we needed to have long before states started to adopt national standards, largely in the pursuit of federal dough.

All that said, there is one, small part of the report that I find quite satisfying. A few months ago, Fordham President Chester Finn called people like me and Jay Greene “paranoid” for arguing that national standards would be hollowed out by politics. Well, in the report, while it is not explicitly identified as such, you will find what I am going to take as an apology (not to mention a welcome admission):

How will this Common Core effort be governed over the long term?…This issue might seem esoteric, almost philosophical in light of the staggering amount of work to be done right now to make the standards real and the assessments viable. But we find it essential—not just for the long-term health of the enterprise, but also to allay immediate concerns that these standards might be co-opted by any of the many factions that want to impose their dubious ideas on American education. You don’t have to be a conspiracy theorist to worry about this possibility [italics added]…

No, you don’t.

The infamous Conway attack on Rand Paul may be found here. Most people have focused on religion and politics in talking about the ad. I want to examine a part that has been overlooked.

We often hear that contemporary liberalism comprises a big state role in economic regulation combined with a small state regarding social and civil liberties. Maybe not.

Look at the disclaimer at the beginning of the ad. Who is standing behind Jack Conway? Those two gentlemen would police officers, probably Kentucky state police. Why are they there? After all, Conway could have put his loving wife and dear children in the background. But he choose police officers. Conway is saying: “I stand with the forces of order.” Not a very socially liberal message.

Why are the police willing to be in Conway’s ad? After all, the forces of order usually endorse the Republican candidate. Not this time. The Fraternal Order of Police in Kentucky endorsed Jack Conway. Why? Rand Paul suggested the drug war in Kentucky might be paid for in Kentucky. This had two effects. First, it cast doubt on the holiness of the anti-drug crusade. By putting the police officers behind him, Jack Conway is saying: “I will fight the drug war no matter what.” Not good for social liberalism or civil liberties.

Of course, the police have a material interest in the drug war in Kentucky. They believed that Dr. Paul’s call for federalism would mean lower salaries and less resources for the drug war in Kentucky. Conway is saying here: no budget cuts for my friends, the forces of order. Thus does the drug war bring the Kentucky State Police and the Daily Kos into a political alliance.

Like most politicians, Jack Conway is doing whatever is necessary to win a senate seat. He could end up as the pivotal vote for a Democratic Senate majority, at least in partisan matters.

If he votes as he ran, Conway will be a reliable vote for the policy status quo on the drug war, against civil and social liberties, and for a politics that always and everywhere covets victory “by any means necessary.” He should fit in well in Washington, especially with the more authoritarian parts of the GOP.

Peter Baker reports in the New York Times:

To better understand history, and his role in it, Obama invited a group of presidential scholars to dinner in May in the living quarters of the White House.* Obama was curious about, among other things, the Tea Party movement. Were there precedents for this sort of backlash against the establishment? What sparked them and how did they shape American politics? The historians recalled the Know-Nothings in the 1850s, the Populists in the 1890s and Father Charles Coughlin in the 1930s.

I’m struck by the historians’ choices (or maybe President Obama’s recollection of their choices)? Who are the Tea Partiers like? The Know-Nothings and Father Coughlin’s left-wing, anti-capitalist, anti-semitic Union for Social Justice. (And the Populists, which is a more interesting comparison, being a mass movement that arose mostly spontaneously. But it was primarily a political party, which reflects the confusion that the term “Tea Party” seems to generate.) Nobody thought of, say, the antiwar movement of the 60s or the tax revolt of the 70s? Or even the counterculture and feminist movements, both of which pioneered the cultural-reform style that Jonathan Rauch finds in the Tea Party:

Raise consciousness. Change hearts, not just votes. Attack corruption in society, not just on Capitol Hill.

With a few rare exceptions like Rauch and John Judis, non-conservative intellectuals are just freaked out by a mass movement against big government. Jill Lepore, Sean Wilentz, E. J. Dionne, Frank Rich — they just can’t imagine that real middle-class Americans could honestly oppose President Obama’s tax-and-spend agenda and march in the streets against it — just like, you know, they did against the war and stuff. It’s got to be racism, billionaires, extreme libertarianism, extreme authoritarianism, the John Birch Society, something. And so they tell the president that the Tea Party is reminiscent of “the Know-Nothings and Father Coughlin.” Why oh why can’t we have better historians?

*It’s not clear if this dinner is different from the widely reported July 2009 dinner with historians.

The New York Times took a look at people who voluntarily send money to Washington in order to help pay down the federal debt. Last year, the Bureau of the Public Debt received $3.1 million in such donations. Looking at the federal budget, I found a total of $241 million in “gifts and contributions” for fiscal year 2010.

Charitable donations to the federal government are insignificant when compared to donations made to private charities. A Cato essay on welfare spending points out that Americans contribute more than $300 billion a year to organized private charities and volunteer more than 8 billion hours a year to charitable activities, which can be valued at about $158 billion.

Thus when given the choice, people overwhelmingly entrust their donations to private charities not the government. One can only imagine what donations to private charities would be if government at all levels didn’t confiscate trillions of our dollars in taxes every year.

Warren Buffett, one of the richest men in the world, decided several years ago to leave most of his fortune to private charities. Buffett is notorious for advocating tax increases to support government spending. Yet, when he made the decision to donate his wealth, Buffett went with the private sector instead of the government.

A frustrating aspect of today’s public policy debate is that many pundits seem oblivious to the fact that the private sector could take care of those people truly in need if it was allowed to retain more of its earnings from the clutches of government. The government “crowds out” all kinds of private efforts and resources. If the government were to recede, private sector efforts to aid the needy would expand.