Monday, February 6, 2012

Would Clint Eastwood Bail Out Super Bowl Losers, Too?

Bad Product = Low Sales

Did Not Receive A Half Time Bail Out

A Chrysler Super Bowl commerial featuring Clint Eastwood asserts that it is "halftime in America" and that firms like Italian-owned Chrysler are leading an industrial resurgence in the USA.  According to Eastwood:

"Detroit’s showing us it can be done. And, what’s true about them is true about all of us. This country can’t be knocked out with one punch. We get right back up again and when we do the world is going to hear the roar of our engines."

Oddly, Eastwood did not mention that American consumers delivered a knock-out blow to Chrysler, because of the poor products the company offered, like the Dodge Dakota pictured above.   Simply put, Americans preferred cars made by Ford, Toyota, Volkswagen and Honda, for instance.  (See this article in Forbes, which includes the Dakota and other Chrylser products among "the worst cars on the road.")  Then, American taxpayers bailed the company out, to the tune of $1.3 Billion, according to the Department of the Treasury.  (This does not include another $12 Billion in low-interest loans that the company received.)  During the same period, of course, 400,000 other businesses failed and received no such corporate welfare.  It's much easier to "get right back up again" after someone writes you a check for $1.6 Billion.

By contrast, when the New England Patriots underperformed last evening they lost.   There was no half time bailout for Tom Brady et al.  (Nominally, the Patriots were leading, but they were obviously struggling.)  That's the way competition is supposed to work in a free society.   Eastwood should know better.

Saturday, February 4, 2012

President Obama's Upside Down Tuition Rhetoric

In his recent State of the Union Address, President Obama decried what he called "skyrocketing" tuition at American Universities and called on Congress to withdraw federal support from Colleges if such increases continue.  As the President put it:

"[L]et me put colleges and universities on notice: If you can’t stop tuition from going up, the funding you get from taxpayers will go down." 

The Administration subsequently explained that it will ask Congress to cut the availability of student loans in those states where public universities raise tuition more than the Administration would like.  This is upside down.  To be sure, tuition has risen significantly over the past few years.   However, colleges that have raised tuition have had little choice.  Across the nation, states responded to the recent recession by reducing financial support for higher education.  (This article describes this phenomenon in North Carolina.).  Colleges and Universities in such states have responded by raising tuition in an effort to maintain the quality of the product they offer, and tuition at such universities is still significantly below the cost of the education provided.  Moreover, many such universities have set aside significant portions of the proceeds from such increaes to support need-based financial aid that ensures the very sort of access President Obama claims to support.  California, for instance, recently set aside 1/3 of the proceeds from a tuition increase to expand the pool of resources available for need-based financial aid. 

In sum, state budget cuts have caused colleges and universities to raise tuition to protect the quality of the product they offer and generate sufficient funds for financial aid.  Instead of deterring future tuition increases, cuts to the Federal Loan Program will punish the very students harmed by increased tuition and likely cause schools to raise tuition even more to generate the financial aid necessary to ensure sufficient access. 

Friday, February 3, 2012

A Presidential Remedy for Obamacare

Understood the Nature of Executive Power


Last week former Senator Norm Coleman, purportedly an advisor to Governor Romney, predicted that no President, Republican or otherwise, could repeal President Obama's Health Care Reform Legislation in its entirety.  Instead, he said, Republicans could repeal portions of the legislation while leaving other portions intact.  In so doing, he contradicted promises by major Republican candidates for President to work with Congress to repeal so-called "Obamacare" if elected to replace President Obama. 

Senator Coleman may overestimate the difficulty of eliminating "Obamacare" in its entirety.  After all, as some courts have already held (see also here), the Law's coercive requirement that individuals purchase health insurance policies designed by the National Government exceeds the authority that the Constitution confers on the Congress of the United States, by requiring individuals to engage in commerce, instead of regulating commerce.  Moreover, absent executive branch enforcement, this mandate would become a nullity, as individuals who declined to purchase such insurance would suffer no penalty.  Thus, upon taking office, a President who believed the coercive individual mandate to be unconstitutional could decline to enforce that provision of "Obamacare," thereby discharging his or her duty to "take care that the laws are faithfully executed," given  that the Constitution is, by its terms, the supreme LAW of the land.  (In so doing, the President would also "preserve, protect and defend the Constitution of the United States" as required by the Presidential Oath specified in Article II, Section 1 of the Constitution.)   For, as explained elsewhere on this blog (see also here), the text and structure of the Constitution require the President to decline to enforce statutes that he or she believes to be unconstitutional, without regard to the position taken by courts on the matter.  As James Madison explained more than sixteen decades ago:

       "As the Legislative, Executive, and Judicial departments of the United States are co-ordinate, and each     equally bound to support the Constitution, it follows that each must, in the exercise of its functions, be guided by the text of the Constitution according to its own interpretation of it; and, consequently, that in the event of irreconcilable interpretations, the prevalence of the one or the other department must depend on the nature of the case, as receiving its final decision from one or the other."

Thus, even if the Supreme Court were to err and uphold the coercive individual mandate this term, a President who believed the mandate to be unconstitutional would be duty-bound to decline to enforce that mandate.  In the same way, for instance, Andrew Jackson vetoed a bill attempting to recharter the Bank of the United States in 1832, partly on constitutional grounds, even though the Supreme Court had sustained identical legislation in McCulloch v. Maryland.  As Jackson put it:

"The Congress, the Executive, and the Court must each for itself be guided by its own opinion of the Constitution. Each public officer who takes an oath to support the Constitution swears that he will support it as he understands it, and not as it is understood by others. It is as much the duty of the House of Representatives, of the Senate, and of the President to decide upon the constitutionality of any bill or resolution which may be presented to them for passage or approval as it is of the supreme judges when it may be brought before them for judicial decision. The opinion of the judges has no more authority over Congress than the opinion of Congress has over the judges, and on that point the President is independent of both. The authority of the Supreme Court must not, therefore, be permitted to control the Congress or the Executive when acting in their legislative capacities, but to have only such influence as the force of their reasoning may deserve."

Of course, President Obama's health care reform legislation contains provisions other than the coercive individual mandate.  Moreover, some of these other provisions may not exceed the power of Congress.  Thus, declining to enforce the individual mandate would not itself repeal the legislation in its entirety.  Indeed, courts often strike down particular portions of laws, leaving other portions intact, applying the doctrine of "severability."   However, as previously explained on this blog, Congress declined to include a so-called "severability clause" in the legislation, thus weakening the argument Congress intended parts of the legislation to remain intact if other parts are struck down.  Morevoer, the Obama administration has argued that the individual mandate is a critical part of the reform legislation, without which the legislation could not serve its intended purpose.  This is not surprising.  For, as previously explained on this blog, the individual mandate requires healthy individuals to pay unreasonable rates for health insurance, thereby subsidizing the purchase of health insurance by individuals who are less healthy and thus would otherwise pay higher premiums.  Without the coercive individual mandate to purchase health insurance at unreasonable rates, healthy individuals would rationally choose to self-insure, thereby thwarting the National Government's objective of forcing insurance companies to provide below-cost health insurance to millions.   As a result, a President could rationally conclude, as did one Federal Judge, that the individual mandate is not severable from the rest of the legislation, with the result that the entire legislative reform package is void.  At the very least, the President could conclude that certain provisions inextricably intertwined with the coercive individual mandate must fall along with that mandate.

Hopefully a newly-elected President will heed the views of Madison and Jackson and rid the country of the individual mandate, unless the Supreme Court does so first.