Sunday, February 27, 2011

U.S. Sen. Kay Hagan (D) of North Carolina appointed to Senate Banking Committee

Banking generally requires a strong math background and the ability to apply math to dynamic concepts.

One should take seven minutes and view the video above. Joe Kernen of CNBC's Squawk Box takes us on a math journey. Mr. Kernen attempts to explain the math to Hagan however it becomes another episode for Math Quest.

Please refer to the newest copy of Math Express, calculus, appendix Kay Hagan, and refer to the subsection Jethro Bodine double knot ciphering for the exact formula to crack the code.

Note: if the video does not open, the link is as follows:



Friday, February 25, 2011

Richard Trumka: six impossible things before breakfast

Thomas Sowell wrote a book entitled Economic Facts and Fallacies. The book explains how economic fallacies appear, re-appear, and will again appear in the future [more economic fallacies are being generated all the time]. That many economic fallacies are generated for political reason. That an economic fallacy makes for good politics. (1)

Surely Sowell never imagined that one individual could pack so many fallacies into one eight minute video segment. However, Richard Trumka, quasi-economist at large, captain economic fallacy himself, has managed to created an eight minute action packed adventure into economic fallacy land!

Yes ladies and gentleman, Richard Trumka, named to Obama's Economic Advisory Council in 2009 (that worked out well) and recently named to Obama's Jobs and Competitive Commission (can't wait for the results) has set a new Olympic record for the the most economic fallacies in eight minutes. (2) (3) (4)

Take eight minutes and watch this wonderful video. You'll laugh, you'll cry, you'll kiss economic theory goodbye!

You see, collective bargaining by public sector workers has absolutely nothing to do with state budget woes and impending bankruptcy. You will find a definition of collective bargaining that is a whooper. How many times can you use the phrase "middle class" in an eight minutes class warfare video? Yes, an increase in collective bargaining creates/increases productivity and creates jobs! And New Jersey's budget problem is merely a myth!

More?!? Sure! Collective bargaining is the only path to the middle class life. Tax increases create jobs! And collective bargaining is the path to the U.S. again becoming the world leader in manufacturing [Ops! We are the current world leader in manufacturing....never mind the facts]. That the collective bargaining dispute/walk out/protests by public sector workers in Wisconsin are all about protecting the middle class elsewhere.

Yes, in one eight minute video Trumka has attempted to set back economic theory 3000 years!

"Sometimes I've believed as many as six impossible things before breakfast." -The White Queen from Alice in Wonderland






Thursday, February 24, 2011

And About that "Lock Box" and Social Security.........

The video above is brought to you courtesy of Dr. Donald Boudreaux, Economics Department, George Mason University. An excellent two minute lesson regarding the wonderful world of social insurance and economic security. (1)

Yes, social insurance and economic security, that fun filled world of impossible promises brought to you by politicos past and present. Yes, those propositions based on "the way things ought to be" which are magic pixie dust carried in the pockets of forest nymphs in the economic pretend world of politicos.

Ah, Boudreaux is merely exaggerating to make a point. There has to be a lock box! There has to be value in that lock box! Where is that lock box and lets go inspect it!

OK! Off to see the wizard of lock boxes!

Social Security: There is No Trust Fund, Only IOU's - Don Luskin, Capitalism Magazine, April, 11, 2005

On Tuesday, President Bush had the most bizarre cabinet meeting any president is ever going to have. It was a meeting with an actual cabinet. A filing cabinet. A filing cabinet in Parkersburg, W. Va., to be precise.

Strange? Yes. But then again this is a very remarkable filing cabinet. By one way of looking at things, it contains $1.7 trillion dollars. But by another, it contains nothing at all.

Of course I'm taking about the filing cabinet in the offices of the Bureau of the Public Debt that holds the assets of the Social Security Trust Fund.

After the meeting, President Bush declared, "a lot of people believe that the Social Security trust is -- the government takes a person's money, invests it, and then pays it back to them upon retirement... It doesn't work that way. There is no 'trust fund,' just IOUs that I saw firsthand..."

In other words, there's nothing there.

The president's opponents were quick to look at it another way. Democratic congressional leaders Harry Reid and Nancy Pelosi said the same day, "It is simply wrong to suggest that the Social Security Trust Fund does not exist, or that the securities held by the Trust Fund are merely pieces of paper. For a president to even suggest that the federal government might, for the first time, default on a security backed by the full faith and credit of the United States unnecessarily misleads American workers..."

Who's right? Is the president right, that the Treasury bonds held by the trust fund are "just IOUs"? Or are the Democrats right, that those bonds are sacred obligations of the United States, just like any other Treasury bond?

Is the president raising valid concerns about the way Social Security is financed? Or, as the Democrats charge, is he threatening to default on the nation's debt?

Both the president and the Democrats are right in their own ways. But that means, necessarily, that both are wrong. I told you it was a remarkable filing cabinet.

Here's the truth about it.

The Democrats are correct that the Trust Fund's cabinet holds actual Treasury bonds, and those bonds are every bit as real as the Treasury bonds you probably have in your IRA or brokerage account. Those bonds -- the Trust Fund's and yours -- are backed by the full faith and credit of the United States, and a default on any of them would be an unprecedented and unthinkable catastrophe for our country.

And nothing whatsoever that President Bush has said should be construed as a threat to default on those bonds. So don't worry -- at least not about that. Period.

There's one very important thing, though, that makes the Trust Fund's Treasury bonds different from yours. You aren't an agency of the US government, but the Trust Fund is. That means when you invest in Treasury bonds, they represent a debt owed by one party to another -- in this case, the government to you. But when the government itself invests in Treasury bonds, those bonds represent a debt owed by one party to itself.

You can't owe money to yourself. What would it even mean to borrow 20 bucks from yourself today and promise to pay it back to yourself on Tuesday?

Here's another way to think about the problem. Social Security is a commitment by the government to make payments to people in the future. The Trust Fund exists, supposedly, to secure that commitment by setting money aside today -- so that in the future, the money doesn't have to come from taxes, borrowing, or spending cuts. Fine -- in principle. But when that money is invested in Treasury bonds, those bonds themselves will have to redeemed in the future, and the money to do that will have to come from taxes, borrowing, or spending cuts.

Of course that makes the Trust Fund's Treasury bonds no different from yours or mine -- they all have to be repaid someday from taxes, borrowing or spending cuts. But my point is that when the Trust Fund holds them, it doesn't accomplish anything. Whether the Trust Fund holds Treasury bonds or nothing at all -- or for that matter, whether or not the Trust Fund exists -- to pay benefits in the future, the government is going to have to tax, borrow or cut spending.

So in that sense, President Bush is absolutely correct when he says "There is no 'trust fund.'"

That makes the Democrats wrong when they fret that Bush's statement amounts to threatening to default on government debt. Think again about the 20 bucks you lent yourself. Suppose you refused to repay yourself when Tuesday rolled around -- is that a default? Would you sue yourself to recover the money you owed yourself?

In other words, since the existence of those Treasury bonds doesn't really affect the government's wherewithal to pay benefits one way or the other, then it would make no difference whatsoever if the Trust Fund simply surrendered them, or for that matter tore them up and threw them in the ocean.

Given Dr. Boudreaux video depiction and Mr. Luskin's analysis, we must give equal time to the forest nymphs and their pockets of pixie dust. Who better to reply then Jacob Lew director of the White House's Office of Management and Budget!

"When more taxes are collected than are needed to pay benefits, funds are converted to Treasury bonds — backed with the full faith and credit of the U.S. government — and are held in reserve for when revenue collected is not enough to pay the benefits due." (3)

Ah ha! We write I.O.U's to ourselves! Suppose we could call these I.O.U'S written to ourselves a real "Lew Lew". Ops! Spell check corrects it to: a real "Lou Lou".





Saturday, February 19, 2011

Wisconsin is coming to a state capital near you!

Wisconsin. Ah, a picture of Wisconsin's state capital building in more tranquil times.

You might ask yourself: how does a nice monopoly such as state government go bankrupt? What do unionized state employees have to do with the bankruptcy of a nice monopoly such as state government?

State government as a monopoly, and monopoly pricing

Governments are monopolies over the services they render. Monopoly theory is vast and undetermined. However from monopoly theory we can surely state that: price can/could/may be influenced by a monopoly.

Conventional wisdom goes one step further and assumes that monopolies controlling prices is related to wages paid. That is, if a monopoly can influence price then surely a monopoly can influence input costs including wages paid.

This is where conventional wisdom comes to the fork in the road and creates a conventional fallacy.

Monopolies and unionized labor

Its intuitive to think that monopolies influence price and hence influence input costs including labor costs. That a monopoly would never deal with a unionized work force. That the monopoly would depress wages. Wrong. Its counter intuitive.

The classic example was the once telephone monopoly Atlantic Telephone and Telegraph (AT&T). Did AT&T have a well compensated work force? Yes. Were AT&T employees unionized? Yes.

Why do monopolies hire monopolies?

Why would one monopoly hire another monopoly i.e. unionize work force. Because the monopoly has pricing power in that: price can/could/may be influenced by a monopoly. Why bother fighting it out at the collective bargaining table when the monopoly can merely pass the cost of labor onto consumers through price.

What if a monopoly or quasi monopoly is regulated as a public utility?

If price increases are regulated by a public utility commission i.e. price controls, the monopoly will act as a "non profit" regarding compensation as compensation figures may well be a matter of public record. That compensation will be paid under a veil.

How so? You see, non profits such as rural electric co-op's know that their members (end users) will be very unhappy if the price paid for wages is high. The co-op members will think the co-op is functioning to enhance itself rather than functioning as a collective scheme to secure rural electric power. Hence the rural electric co-op keeps wages reasonable and skews compensation to benefits and retirement. They can then advertise to their co-op members that wages are very reasonable when in fact total compensation [wages, benefits, and retirement] is much, much, much higher than the pure "wage" they advertise to their co-op members.

Government Monopoly and collective bargaining schemes

One must examine the "both sides of the table" phenomena when considering collective bargaining regarding a government monopoly. What is the "both sides of the table" phenomena?

(1) if bureaucrat X is negotiating with collective bargaining public sector union Y, exactly what motivation does bureaucrat X have regarding negotiations? The problem goes back to Milton Friedman's fourth category of spending: other people (bureaucrat X), spending other people's money (tax payers money), on other people (recipient class which in this case is a public sector union). Therefore the bureaucrat has no motivation because he/she is spending other people's money not his/her own money,

(2) public sector unions have found that they can collect dues through members and funnel dues into political action funds. They then fund the campaigns of politicos that promise them [public sector unions] more compensation. They not only fund certain politicos but actively encourage their union members to campaign for the politico. Once they get their particular candidate elected they have now secured a politico who over sees bureaucrat X.

Wisconsin is coming to a state capital near you!

We know monopolies will hire monopolies. We know that if "wage" is a matter of public record compensation will be skewed toward benefits and retirement compensation. We also know that collective unionized bargaining in the public sector suffers from the "both sides of the table" phenomena. Finally we know that the monopoly through pricing power influence will pass on increased labor compensation costs to the end user. Finally, in the realm of government monopoly price is tax and tax is increased to the end user which is the tax payer aka YOU.

Therefore, unionized collective bargaining in the public sector is a collective bargaining scheme against the tax payer. The collective bargaining scheme has no incentive to reduce costs as cost can be merely passed onto the end user. Moreover, the collective bargaining scheme, in a government monopoly setting, actually has incentives to pass on larger and larger price increases to the end user in the form of price influence and in this case tax increases. Lastly, the end user, the tax payer aka YOU are not represented at the negotiating table due to the "both sides of the table" phenomena.

Update 02/27/2011: The Political Economy of Government Employee Unions - Thomas DiLorenzo
Update 03/01/2011: Katherine Kersten: The good life (for unions especially).
Update 03/02/2011: Dodging the Pension Disaster - Josh Barro

Friday, February 18, 2011

Obama's Proposed Budget: the bad meets the impossible

The first lesson of economics is that we live in a world of scarcity. There is never enough of anything to satisfy all those who want it. The first lesson of politics is to ignore the first lesson of economics. - Thomas Sowell

Looking at the graphical depiction of Mr. Obama's budget, it appears all is not as it seemed in his grand sales pitch.
You see, the red line is bad, the blue line is impossible and the blue and red lines yield the nice bold yellow arrow which depicts the bad meeting the impossible.

One should note the dotted blue line. This is the historical revenue line. This historic revenue line is also known as Hauser's Law. What is Hauser's law?

Hauser's Law

"Over the past six decades, tax revenues as a percentage of GDP have averaged just under 19% regardless of the top marginal personal income tax rate. The top marginal rate has been as high as 92% (1952-53) and as low as 28% (1988-90). This observation was first reported in an op-ed I wrote for this newspaper in March 1993. A wit later dubbed this "Hauser's Law."

Over this period there have been more than 30 major changes in the tax code including personal income tax rates, corporate tax rates, capital gains taxes, dividend taxes, investment tax credits, depreciation schedules, Social Security taxes, and the number of tax brackets among others. Yet during this period, federal government tax collections as a share of GDP have moved within a narrow band of just under 19% of GDP." (1)

Hence we know that regardless of the mix of taxation rates we end up with between 18 and 19% tax revenue as a percentage of GDP. Why?

"Why? Higher taxes discourage the "animal spirits" of entrepreneurship. When tax rates are raised, taxpayers are encouraged to shift, hide and underreport income. Taxpayers divert their effort from pro-growth productive investments to seeking tax shelters, tax havens and tax exempt investments. This behavior tends to dampen economic growth and job creation. Lower taxes increase the incentives to work, produce, save and invest, thereby encouraging capital formation and jobs. Taxpayers have less incentive to shelter and shift income.

On average, GDP has grown at a faster pace in the several quarters after taxes are lowered than the several quarters before the tax reductions. In the six quarters prior to the May 2003 Bush tax cuts, GDP grew at an average annual quarterly rate of 1.8%. In the six quarters following the tax cuts, GDP grew at an average annual quarterly rate of 3.8%. Yet taxes as a share of GDP have remained within a relatively narrow range as a percent of GDP in the entire post-World War II period." (2)

Bogus Blue line

Make note of the solid blue line on the "proposed" side of the graphical depiction. Note that the blue line is far above the dotted historical blue line aka Hauser's Law. Hence somehow, someway, the revenue line is going to exceed historical results for a sustained period. Try a sustained period of five decades. Yes, for basically 50 straight years Hauser's Law will not apply. That is to say, the depiction of revenue is in direct violation of Hauser's Law and direct contrast to historical revenue data.
Why is this blue line drawn in such a way that breaks Hauser's Law? Its because the Obama budget has massive tax increases buried in the budget. Yes, $1.6 trillion dollars of tax hikes!(3) No way! Way! Yikes!

The implicit and explicit assumption within the Obama budget proposal is that the $1.6 trillion of new additional taxes will not only be collected but collected on a sustained basis. However, we know from Hauser's Law as well as The Laffer Curve that the supposed revenue from the tax increase will never appear. (4)

If the revenue will never appear then why show it appearing via the solid blue line on the proposed side of the graph? If the revenue will never appear why make the revenue an implicit and explicit assumption within Obama's proposed budget? Because its an old politico game. Politicos raise taxes and assume total collection of the tax increase which in fact never appears. Hence they make a bogus assumption to substantiate and/or support their spending.

Assume you buy the rosy scenario. Of what does this $1.1 trillion in deficit reduction consist? Painful cuts? Think again. It consists of $1.6 trillion in tax hikes, plus an odd $328 billion of some mysterious bipartisan funding for a transportation trust fund (gas taxes, one supposes) - for a grand total of nearly $2 trillion in new taxes.

Classic Obama debt reduction: Add $2 trillion in new taxes, then add $1 trillion in new spending and, presto, you've got $1 trillion of debt reduction. It's the same kind of mad deficit accounting in Obamacare: It reduces debt by adding $540 billion in new spending, then adding $770 billion in new taxes. Presto: $230 billion of "debt reduction." Bialystock & Bloom accounting. - Charles Krauthammer (5)

Welcome to Mathematics!

Leaving behind bogus politico mathematics and returning to proven mathematical theory, suppose for a moment you had revenue equaling 18.5% of GDP. And further suppose you spent 18.5% of GDP. Wow! Rocket science! A balanced budget! No way! Way!

Dawn your tin-foil hat because we are going to a level of mathematics that is on the lunatic fringe. Suppose you only spent 18.4% or 17.9% or even 17%. You guess it! You can reduce your accumulated debt (National Debt currently standing at $14 trillion).

**to view the above graph in more detail visit:






Monday, February 14, 2011

Betsy McCaughey on ObamaCare

Meet Betsy McCaughey

"Betsy McCaughey is a patient advocate, passionate about healthcare. In 1993 she read the 1,362-page Clinton health bill, warned the nation what it said, and made history. Today she is doing it again. With a Ph.D. in Constitutional History, she can actually tell us what the Obama health law says.

In 2009 medical excellence and freedom came under assault again, and McCaughey put her skills to work. She was the first to uncover the health provisions slipped into the February, 2009 stimulus bill. Members of Congress were stunned to learn the stimulus bill could limit care for seniors and dictate your doctor’s decisions.

Since then McCaughey has dissected each major health bill and reported the contents to the nation, dispelling false claims such as “you can keep your health plan if you like it,” or “there will be no cuts to hurt seniors.” She backs up her findings with page references to the bills, her critics respond only with generalities." (1)


Dissertation defended with distinction
Richard B. Morris Prize
Bancroft Dissertation Award
John Jay Fellowship


General and Departmental Honors
Woodrow Wilson Fellowship
Herbert H. Lehman Fellowship
Honorary Vassar Fellowship


Post-doctoral Fellowship from the National Endowment for the Humanities
John M. Olin Fellowship
H. L. Mencken Award
National Magazine Award for “No Exit,” a critique of the Clinton Health Plan
Annual Prize from the American Society of Anesthesiologists. (2)

Her web site is:



Saturday, February 12, 2011

Unemployment Insurance is Insurance?

Not everything named insurance is insurance. - Thomas Sowell

Rising unemployment insurance taxes?

"Rising unemployment has placed such a burden on states that 30 of them owe the federal government $42 billion in money borrowed to meet their unemployment insurance obligations. Three states already have had to raise taxes to begin paying back the money they owe. More than 20 other states likely would have to raise taxes to cover their unemployment insurance debts. Under federal law, such tax increases are automatic once the money owed reaches a certain level.

Under the proposal, the administration would impose a moratorium in 2011 and 2012 on state tax increases and on state interest payments on the debt.

In 2014, however, the administration proposes to increase the taxable income level for unemployment insurance from $7,000 to $15,000. Under the proposal, the federal unemployment insurance rate would be adjusted so that the new higher income level would not result in a federal tax increase, the person familiar with the plan said." (1)

How is your state doing?

"Due to record high unemployment claims and in many cases poor financial planning, 25 states have run out of funds and been forced to borrow from the federal government, raise taxes or cut benefits. Increasingly, those fiscal woes are landing at the doorstep of business owners and unemployed workers. Employers in 36 states face unemployment insurance tax increases ranging from a few dollars to nearly $1,000 per worker for 2010, and six states have taken steps to cut back or freeze benefits". (2)

You can find a search-able data base for each state regarding tax increases and/or benefit cuts associated with state unemployment insurance at the following link:

Which states unemployment funds are bankrupt and borrowing atop of bankruptcy?

"The unemployment insurance system is in crisis due to a combination skyrocketing unemployment and – in some cases – poor planning. A record 20 million Americans collected unemployment benefits last year, and thirty states have run out of funds and been forced to borrow from the federal government, raise taxes, or cut benefits. In many other states the situation is deteriorating fast. Using near real-time data on state revenues and the benefits they pay out, we estimate how long state trust funds will hold up. Click on a state to find the latest, plus historical data, and details on tax increases and benefit cuts." (3)

The following is a link to a map showing which states unemployment funds are not only bankrupt but are borrowing to boot:

Unemployment insurance is insurance? A social insurance safety net?

Unemployment insurance is not "insurance" in the traditional sense. It looks like insurance, is portrayed as insurance, is sold by politicos as insurance, has insurance in its name, but sorry its not insurance.

Unemployment insurance, like most social insurance schemes, is not a reserved insurance plan as found in the realm of private sector insurance. Rather its a quasi-reserved scheme which depends on the taxing ability of a central government to supply benefits. Unemployment insurance suffers from the same basic problems that exist in other social insurance schemes such as Medicare, Social Security and your newest friend ObamaCare.

Social insurance schemes work nicely as long as no one uses the benefits. What? Insurance is to pay for sudden claims? That you are transferring a risk for a consideration. If a loss occurs then your consideration paid is your basis for your ability to make claim. Then why does the social insurance scheme only work if you don't make a claim? That makes no sense!

It makes total sense. You see, a social insurance scheme is not reserved to pay claims or is only thinly reserved. When claims roll in the quasi-reserve is quickly depleted. The reason the reserve is quickly depleted in that the system is based on "pay as you go". The pay as you go system quickly breaks down when current claims exceed current tax dollars flowing into the plan. The result being an increase in tax and a rationing of benefit. Its an old story.

The political-economy of disincentives followed by more disincentives

Politicos at the federal level used borrowed money to create a disincentive to work (the time period from 26 weeks to 99 weeks of unemployment benefits). The states used borrowed money as well [borrowing from the borrower i.e. feds] to create a disincentive to work (give the scheme the benefit of the doubt and say the marginal end of the 26 weeks creates a disincentive).

Wait! Its a social safety net that helps the unemployed. Yes and no. First we have to understand that as far as an insurance plan its a political mirage that doesn't pay the benefit advertised. That the benefit paid merely results in an increase in taxes paid and/or a reduction in benefit paid. However, studies show that when people collect benefits that on average people stay on the benefits until the last four weeks before the benefit ends. Hence we have a social safety net that creates a moral hazard of staying on the benefit until the end of the benefit period which is then a disincentive to seek employment, on average, in an expeditious fashion. (4)

Politicos through the mechanism of government have gone way beyond the moral hazards associated with 26 weeks of unemployment and have created 99 weeks of unemployment. The disincentive to seek work has exponentially increased. Further, there is a grand difference between seeking work near the end of a 26 week period vs. the end of a 99 week period.

Creating disincentives is bad economic policy. However, if you borrow money to create a disincentive, that is pure madness. Moreover, if sub-governments [states]borrow money from a central government, who is simultaneously borrowing, you are then borrowing from the borrower to create disincentives which is maximum insanity.

Welcome to The Asylum for the Disincentive Borrower. Those that have created disincentives go onto create yet another disincentive: doubling the unemployment "insurance" tax. Hence politicos through the mechanism of government have created disincentives through 99 weeks of unemployment insurance merely to turn around and create an additional disincentive for firms to hire those that are in fact unemployed.

Exactly what kind of insane exercise is this little trip into the vortex of disincentive? Once politicos have entered the vortex of disincentive they somehow portray this entire exercise as being beneficial to John and Jane Goodfellow. How so? Politicos then frame this disincentive boondoggle as economic stimulus!

Let me say that unemployment insurance… is one of the biggest stimuluses (sic) to our economy. Economists will tell you, this money is spent quickly. It injects demand into the economy, and it’s job creating. It creates jobs faster than almost any other initiative you can name. - Nancy Pelosi (5)







Friday, February 11, 2011

Two means of repealing ObamaCare

"There are, however, two possible means of repeal. There is actual legislative repeal, passed by both Houses and signed by the president, which cannot happen until 2013 at the earliest. And there is effective repeal, in which the body politic rejects the substance of the bill, seeks waivers and exemptions, supports defunding important provisions, and challenges it in court, all of which would have the effect of making the whole scheme unworkable. This could be the ultimate fate of Obama’s signature legislation."
- Tevi Troy, former Health and Human Services Secretary, Commentary Magazine, 01/2011

The link to the complete article by Mr. Troy appears below:

Friday, February 4, 2011

Waiver Application Form for ObamaCare

Need waiver? Want waiver? Get waiver!

Below is the link to the ObamaCare waiver form with complete instructions. Give it your best shot!

Annual Limit Waivers from

Thursday, February 3, 2011

"The Nine Most Terrifying Words" - a new rendition of Ronald Reagan

More on the severability clause and ObamaCare

Video: Lack of severability in ObamaCare a “colossal mistake” -

'Or was it? Larry O’Donnell blames Democrats for rushing the ObamaCare bill to a vote and forgetting to insert the severability clause, but Jonathan Turley isn’t buying the post-Florida verdict spin from Capitol Hill. He suggests that Democrats deliberately left out the severability clause as a triple-dog dare to judges. Take out the mandate, the strategy goes, and lose all of the goodies in the rest of the bill! Unfortunately for Democrats, they lost this particular round of “chicken.”'(1)



Judge Vinson's Individual Mandate Ruling and Continued Implementation

With Judge Vinson's ruling striking down the individual mandate of ObamaCare as unconstitutional and with the lack of a severability clause causing the entirety of ObamaCare to be void, how can the Obama Administration continue implementation?

"It’s well known that Judge Roger Vinson ruled yesterday that the individual mandate exceeded the powers of the federal government under the Commerce Clause. But he also ruled that because the law lacked a severability clause and the law’s proponents had argued that the individual mandate was a necessary part of the scheme, the entire law was invalid." (1)

From page seventy five of Vinson's ruling:

"The last issue to be resolved is the plaintiffs’ request for injunctive relief enjoining implementation of the Act, which can be disposed of very quickly. Injunctive relief is an “extraordinary” [Weinberger v. Romero-Barcelo, 456 U.S. 305, 312, 102 S. Ct. 1798, 72 L. Ed. 2d 91 (1982)], and “drastic” remedy… It is even more so when the party to be enjoined is the federal government, for there is a long-standing presumption “that officials of the Executive Branch will adhere to the law as declared by the court. As a result, the declaratory judgment is the functional equivalent of an injunction.” See Comm. on Judiciary of U.S. House of Representatives v. Miers, 542 F.3d 909, 911 (D.C. Cir. 2008); accord Sanchez-Espinoza v. Reagan, 770 F.2d 202, 208 n.8 (D.C. Cir. 1985) (“declaratory judgment is, in a context such as this where federal officers are defendants, the practical equivalent of specific relief such as an injunction . . . since it must be presumed that federal officers will adhere to the law as declared by the court”)…There is no reason to conclude that this presumption should not apply here. " (2)

And that means?

"That means that under the ruling, the law is void and cannot be implemented from this point forward. The Administration’s legal remedy is to seek a stay of the ruling pending appeal. It cannot just defy a federal court ruling." (3)

Deeper Meaning?

"The Law:

Already bruised and unpopular, ObamaCare has now been issued a death sentence. Yet the White House says it will "proceed apace" with its implementation. Has anyone there heard of checks and balances?

It's worth noting that Monday's ruling by U.S. District Court Judge Roger Vinson that the Democrats' health care overhaul is unconstitutional is only the latest setback for the badly flawed legislation inflicted on the nation last March.

The measure was already invalidated by the courts once before, the House has overwhelmingly passed a bill to repeal it, insurance companies are bailing out of markets left and right because of its profit-killing mandates and the government has issued Obama-Care waivers by the hundreds.

And now 47 lawmakers have signed on as co-sponsors of a repeal bill in the Senate.

Despite all this, and with no sense of irony, the White House contends Vinson "overreached" in his decision, vows that the revamping of the world's best health care system will continue and warns states against using the ruling to delay its implementation.

What is it about "unconstitutional" that this administration doesn't understand?

True, Vinson didn't grant an injunction against ObamaCare in his 78-page ruling. But that's because he clearly considers his judgment to be an injunction in itself. He expects the executive branch to comply with the law as he has ruled. "There is no reason to conclude that this presumption should not apply here," he wrote.

As one of the lawyers for the 26 states that sued to block Obama-Care put it: "The statute is dead."

That means current regulations, such as forcing insurance companies to treat 26-year-olds as children and provide free preventive care for policyholders, cannot be enforced, and new regulations should not be written."(4)

And so follow the ruling

"In light of Judge Roger Vinson’s ruling that Obamacare is unconstitutional, Wisconsin’s attorney general, J. B. Van Hollen, has declared the Badger State free of any obligations imposed by the law. “Judge Vinson declared the health care law void and stated in his decision that a declaratory judgment is the functional equivalent of an injunction,” Hollen says in a statement. “This means that, for Wisconsin, the federal health care law is dead — unless and until it is revived by an appellate court.”

Steve Means, a senior official in Hollen’s office, tells NRO that the ruling “effectively takes the health-care-reform bill off of the books.” He adds, “At a practical level it will really be up to the governor and his cabinet to determine what they will do in terms of day-to-day activities.”(5)

Don't follow the ruling?

"So has the Obama administration halted the implementation of the law? The answer is: No.

The website of the White House is unambiguous about this: “Implementation will continue.”

Vinson’s decision did not include an injunction to stop the implementation of health care reform on the grounds that an injunction would be superfluous. He argued that the government would stop implementing the law automatically once it was announced as unconstitutional.

That, apparently, hasn’t happened.

So here’s a question: should government officials mindful of the constitution start defying the Obama administration to honor the decision by the court? If, say, you were charged with monitoring the computers that send out rebate checks to seniors with high prescription drug costs, should you turn off the computer?

Much of this is probably theoretical. Most of the law did not yet apply, so implementation was minimal. But if you were working on implementing the law, shouldn’t you be obligated to stop work?

“Pencils down” as we used to say back when an M&A deal fell apart." (6)








Wednesday, February 2, 2011

ObamaCare and the Severability Clause

ObamaCare does not contain a "severability clause". What is a severability clause?


1. If any provision or provisions of this Agreement shall be held to be invalid, illegal, unenforceable or in conflict with the law of any jurisdiction, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby.

2. Invalidity or unenforceability of one or more provisions of this Agreement shall not affect any other provision of this Agreement.

3. In the event that any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such invalidity, illegality or unenforceability shall not affect any other provisions of this agreement, but this agreement shall be construed as if such invalid, illegal or unenforceable provisions had never been contained herein, unless the deletion of such provision or provisions would result in such a material change so as to cause completion of the transactions contemplated herein to be unreasonable. (1)

Hence if you add a severability clause and one provision is struck down then the remaining provisions continue.

Why was no severability clause added to ObamaCare

To find the answer one must first ask if ObamaCare ever have a severability clause? Yes.

'In addition, Judge Vinson notes that Congress could have easily included a severability clause in the legislation if they wanted to, that an earlier version of Obamacare did indeed have such a clause, but Congress intentionally removed the severability clause in the final bill. Judge Vinson wrote that the Obama Administration has “asserted again and again that the individual mandate is absolutely ‘necessary’ and ‘essential’ for the Act to operate as it was intended by Congress. I accept that it is.” ' (2)

Why was the severability clause removed in the final ObamaCare bill? Apparently severability was removed based on Section 1501 of ObamaCare which is the individual mandate. In a nutshell, without the individual mandate to buy health insurance the plan would fail. That the mandate was used to show costs being lowered [keeping total cost under one trillions dollars] as 32 million people were supposedly added to the insurance pool and lowered cost due to volume and their new found forced ability to pay medical costs through mandated insurance. Further the mandate supposedly stopping people from buying coverage only when they needed coverage then later lapsing the coverage. The fine for not buying coverage was further factored into the Congressional Budget Office (CBO) figures showing total cost being under one trillion dollars. Hence without the mandate the CBO estimates would have shown no savings and a price tag well in excess of one trillion dollars. (3) (4)

Then ObamaCare is void?

When Section 1501 of ObamaCare was ruled unconstitutional by Judge Vinson then the entire ObamaCare scheme was ruled entirely null and void by Vinson as no severability clause was included. (6)

'Judge Vinson also found that Section 1501 of the act, which forces all Americans to buy government-approved health insurance policies, “falls outside the boundary of Congress’ Commerce Clause authority and cannot be reconciled with a limited government of enumerated powers.” But then Judge Vinson went even further, concluding that “the individual mandate and the remaining provisions are all inextricably bound together in purpose and must stand or fall as a single unit.” Accordingly, Vinson concluded: “Because the individual mandate is unconstitutional and not severable, the entire Act must be declared void.” ' (7)

Then ObamaCare will not be implemented?

Implementation will continue. How so?

'The ruling marks the first time a federal judge has struck down the entire law. "I must conclude that the individual mandate and the remaining provisions are all inextricably bound together in purpose and must stand or fall as a single unit," the judge ruled.

Noting that the judge did not order the government to stop implementing the law, a senior administration source said "implementation will proceed at pace." '