Consider This A Warning: A New Legal Threat to Obamacare Brewing in the D.C. Courts?

Thomas Warns*

This week, the most important Affordable Care Act case since NFIB v. Sebelius is being argued in a Washington, D.C. courtroom. While the Supreme Court is hearing oral arguments in Sebelius v. Hobby Lobby, a case which touches on important notions of individual liberty, free exercise of religion, and corporate rights, the far more important case is being argued in the D.C. Circuit Court of Appeals: Halbig v. Sebelius (side note: does anyone get sued as often as poor Kathleen Sebelius?).

What makes the Halbig case such a big deal? Unlike Hobby Lobby, it actually has the potential to upend the entire law. The Wall Street Journal summed up the case succinctly:

The Affordable Care Act—at least the version that passed in 2010—instructed the states to establish insurance exchanges, and if they didn't the Health and Human Services Department was authorized to build federal exchanges. The law says that subsidies will be available only to people who enroll "through an Exchange established by the State." The question in Halbig is whether these taxpayer subsidies can be distributed through the federal exchanges, as the Administration insists.

This new challenge to the Affordable Care Act could eliminate subsidies for people signing up through the 34 federally-run healthcare exchanges. A recent estimate from the Department of Health and Human Services indicates around 85% of people signing up through federal exchanges receive a subsidy of some kind; it’s no wonder that one supporter of the law commented “probably the most significant existential threat to the Affordable Care Act.”

Surely this was a mistake in language that was overlooked? No, the wording was intended by Congress. The anti-commandeering principle, reaffirmed by the Supreme Court in New York v. United States, states that the federal government may not commandeer the sovereign state governments and force them to undertake a federal regulatory regime. Thus, the federal government would have run afoul of this unquestioned principle if it required the states to set up exchanges. Instead, they offered subsidies as an incentive for the states to set up their own healthcare exchanges.

At the District Court level, the judge sided with the government and stated that the clear language about the subsidies for state exchanges was essentially surplusage. The judge indicated that he was interpreting the law in this way in order to preserve the central purpose of the ACA, which was to provide low cost healthcare to all Americans, and further that his reading of the ACA was the one compelled by the law. But as Jonathan Adler (who first raised this issue with the law last year) points out, the text of the law indicates that the federal government wanted the states to set up their own exchanges, and that the subsidies were just one of the ways the law encouraged the states to act. Legislative history also shows that it was not oversight that there were no subsidies for federal exchanges, but that it was an active issue proposed by two Democrats that supported the ACA and wrote amicus briefs for the government in this case.

The three judge panel of the D.C. Circuit Court hearing this case includes a George W. Bush appointee, a George H.W. Bush appointee, and a Jimmy Carter appointee, which seems favorable to the plaintiffs. If the government loses however, they could ask for an en banc review by the entire D.C. Circuit, which would likely be more favorable – if you recall, the Senate recently rewrote the filibuster rules in order to fill several vacant seats in that Circuit with liberal judges. Whether the case ever reaches the Supreme Court remains to be seen, however the longer that takes the better for supporters of the ACA; the more entrenched the law becomes, the harder it will be to remove.

The Affordable Care Act has been marked by lawless implementation for years now. The President and his executive agencies have altered, modified, and delayed important aspects of the law unilaterally so many times now that one almost forgets it was a law passed by Congress, just like any other law. The House Ways and Means Committee investigated this decision by the IRS and HHS to include subsidies in spite of the law’s text, and found it would cost taxpayers $500 billion over the next decade. The judiciary should do its part, and enforce the law as Congress passed it, not as the President and his agents would like it to be. Considering the chorus of smug commenters from the left shouting “It’s the law!” it only seems fair that those on the right tell their liberal friends be careful what you wish for because right now it is the liberals who are desperately avoiding enforcement of the law. 

*Thomas Warns is a J.D. Candidate, class of 2015, at NYU School of law, Staff Editor on the NYU Journal of Law & Liberty , and author of the weekly column "Consider This a Warning."

Consider This A Warning: On Income Inequality

Thomas Warns*

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Last month President Obama delivered a speech in which he declared income inequality (along with a lack of upward mobility) as the “defining challenge of our time.” He went onto say that the American Dream was increasingly out of reach for Americans born into poverty, citing statistics that indicate the infrequency with which poor children escape poverty in adulthood. A month later, he unveiled the first of his “Promise Zones,” which are five areas of the country where the administration will work with local leaders to cut red tape and tap existing resources; the goal is to make sure that a child’s success is determined “not by the ZIP code she lives in but by the strength of her work ethic and the scope of her dreams.”

This of course is not the first time “income inequality” has been thrust to the forefront of the national consciousness. The most memorable national discussion on the topic in recent years was undoubtedly during the Occupy Wall Street movement, when the “99%” rallied against the “1%.”

Adding more fuel to the growing flames, the Los Angeles Times this week published an article which contained some surprising statistics about the distribution of wealth globally. The article states in part:

The study found the richest 1% had $110 trillion in wealth -- 65 times the total wealth of the bottom half of the population. That bottom half of the population owned about $1.7 trillion, or about 0.7% of the world's wealth. That's the same amount as owned by the 85 richest people, the report said.

The findings undermine democracy and make it more difficult to fight poverty, the report said. “It is staggering that in the 21st century, half of the world’s population own no more than a tiny elite whose numbers could all sit comfortably in a single train carriage," said Winnie Byanyima, the group's executive director. "Widening inequality is creating a vicious circle where wealth and power are increasingly concentrated in the hands of a few, leaving the rest of us to fight over crumbs from the top table," she said.

Almost any American finds these numbers jarring, and it is easy to see why. America is proud to boast that it is the “land of opportunity,” with a chicken in every pot and a car in every garage; now it seems that the American dream is harder to reach, especially for younger Americans, and prosperity is no longer so broadly shared.

But the real issue is not that the income gap between the top and bottom earners is soaring, it is that income for the bottom earners is stagnant. People can be jealous when a neighbor parks a new BMW in their driveway, but they can’t really complain if they drive an Audi. The problem is when you have to sell your Fiat to make payments on your mortgage; it doesn’t matter what your neighbor is driving.

Causes of Income Inequality and Mismatched Solutions

David Brooks of the New York Times gives an excellent rundown of how the income of the top-end earners and bottom-end earners are widening for different reasons. At the top, Wall Street has a perverse compensation scheme, assortative mating means that successful, well-educated people tend to marry each other and pass their advantages to their children, and the superstar effect means that in the Internet age a few superstars will strike gold and capture all of the fans instead of having the fans spread out amongst several artists like in earlier times. At the bottom end, income is dragged down by broken families and the disappearance of low-skilled middle class factory work. Unfortunately, most of those middle class factory jobs are not coming back.

The real problem is that a sorry situation can make for bad policy. Many people have suggested raising the minimum wage to combat the income gap. However evidence suggests that the problem is not that the poor are not being paid enough, but that the poor are not able to work enough hours or find work at all. Raising the minimum wage would merely price a lot of poor people out of entry level jobs, since many of those jobs would disappear.

Many numbers detailing income inequality in the United States look at pre-tax income, and thus fail to take into account transfer payments from the rich, who pay most of the taxes, to the poor (though taking that into account still shows a wide gap in wealth). Paul Krugman, also of the New York Times writes that it isn’t really the top 20%, or even top 5% that is the problem. It is the top 1%, or even 0.1% - they are undeserving of such wealth.

Identifying Root Causes of Income Inequality

But blaming the rich people seems somewhat misplaced: wealth is a mutable characteristic (and something which most people desire), and the accumulation of wealth itself is morally neutral. Bill Gates may be the richest man in the world but he isn’t all that bad a guy; in addition to revolutionizing the computer industry to the benefit of billions, he also operates a massive charity, the Bill and Melinda Gates Foundation. The Gates’ are not representative of every billionaire, but they also aren’t alone in giving.

Instead of blaming the rich people for being wealthy, some of the blame (and efforts for reform) should be placed on the institutions that penalize the middle and lower class and help the rich. One of the biggest culprits has been the switch from the gold standard to a system of fiat currency. No longer is the value of the dollar relatively certain; in a single decade inflation can skyrocket, commodities like oil and gold can shoot up ten-to twenty-five fold in value, and the dollar can depreciate by 66% against other major currencies.

If you save money, as most low and middle-income Americans do, then you are likely to lose out – inflation will destroy the value of your savings. But high-income earners have the benefit of the sophisticated securities markets which can reap big returns on their earnings. The result is a massive financial sector which serves the rich and leaves the rest of us to see our savings wither and die.

Wealth Concentration Isn’t Evil, and It Can Be Your Friend

Of course, a concentration of wealth in this environment can be beneficial (to an extent). Though one household with $1,000,000 in income won’t buy as many goods as ten households with $100,000 of income each, concentrated wealth has its advantages. It is mainly the wealthy whose capital expands businesses and adds more jobs, while the middle class and poor are more likely to liquidate their income to satisfy immediate material needs. Thus, talking about income inequality as a terrible vice ignores the fact that some income concentration is beneficial (not to mention deserved), and also that the real problem is falling income for the lower and middle class people.

To a certain extent, we need the productive genius of that 1% (or 0.1%), and some of our greatest industrial heroes haven’t been compensated enough. As Ayn Rand stated in Atlas Shrugged:

“In proportion to the mental energy he spent, the man who creates a new invention receives but a small percentage of his value in terms of material payment, no matter what fortune he makes, no matter what millions he earns. But the man who works as a janitor in the factory producing that invention, receives an enormous payment in proportion to the mental effort that his job requires of him…The man at the bottom who, left to himself, would starve in hopeless ineptitude, contributes nothing to those above him but receives the bonus of their brains.”

The fact that even the poorest Americans have access to electricity is due to the incredible talents of inventors like Tesla, Edison, and Westinghouse; they likely could not be adequately compensated with trillions of dollars when one examines the amount of good they have done for every human being that has followed them. And the productive invention has created millions more jobs for others who possess varying degrees of ability.

“The Reports of My Death Were Greatly Exaggerated” - Democracy

So what to make of the shocking report, as well as President Obama’s efforts to fight income inequality? First, the report sounds over-dramatic. It claims the findings undermine democracy, without mentioning that billions have been lifted out of poverty due to free market economics and democracy. There are plenty of tales of rich kings (Louis XIV, Solomon, Mansa Musa) who lived in opulence while their subjects toiled in misery; now even the poorest Americans have a social safety net that probably means they live more comfortably than King Solomon did.

As for President Obama’s plan for “promise zones,” there are some questions mixed in with the opportunity they present. The President pledges that they will not use any additional federal funding for the zones, which is helpful considering the staggering federal deficit. Instead, he will try to cut through the red tape with tax incentives and improve education opportunities in five neighborhoods to produce positive change. It is always uncomfortable when the federal government intervenes in the economy and essentially picks the winners and the losers; why are poor kids in Southeastern Kentucky getting help from this program but not kids from Detroit? (perhaps due to electoral politics – the Senate Minority leader is from Kentucky).

The plan may have some success though. Despite the President sometimes vilifying the rich, the plan itself is aimed at improving opportunities for low and middle class families, without taking aim at those who are more fortunate. Though some might have different policy ideas on how to get there, virtually all Americans can get behind the idea of keeping the American Dream a possibility for all and not a mirage.


*Thomas Warns is a J.D. Candidate, class of 2015, at NYU School of law, Staff Editor on the NYU Journal of Law & Liberty , and author of the weekly column "Consider This a Warning."

Consider This A Warning: Mayor de Blasio is Taking New York Down the Wrong Path

Thomas Warns*

On the same day that the ball dropped at Times Square, an even more important event occurred – Mayor de Blasio was sworn into office at City Hall. Mr. de Blasio is the first Democrat in the mayor’s office since David Dinkins left City Hall twenty years ago. While the inauguration was an opportunity for supporters to celebrate with the mayor, it also highlighted a few reasons why New Yorkers should be concerned.

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Let’s start with the company de Blasio kept during the inauguration. The first major speaker on the day was Harry Belafonte, a noted music recording artist and civil rights activist. Mr. Belafonte has the dubious distinction of having received praise from Fidel Castro, and once called Condaleeza Rice and Colin Powell “house slaves” of the Bush Administration. Mr. Belafonte proceeded to skewer the outgoing Mayor Bloomberg – who was seated in the first row – without much regard for factual accuracy. In particular, Mr. Belafonte blasted Mayor Bloomberg for stop-and-frisk and bemoaned New York’s high number of incarcerated individuals, without noting that the New York City prison population had dropped by 36% since 2002.

Following Mr. Belafonte was Reverend Fred Lucas Jr., who bizarrely called New York City a “plantation.” While it is confusing what could have prompted such radical language, it is outrageous and slanderous to call Mayor Bloomberg a slave-owning planter, regardless of his own failures to defend liberty. When Bill Clinton, a beloved but comparably moderate liberal icon stepped onto the stage to offer some perspective and remind the crowd of Mayor Bloomberg’s successes as mayor, he was met with deafening silence. The people in attendance were fired up for the new Mayor’s far-left agenda, not an honest reflection on the achievements and disappointments of Mayor Bloomberg’s uneven twelve years in office.

Of course, it was eventually Mayor de Blasio’s turn to speak; amid a growing wave of editorials declaring Mr. de Blasio’s election part of a rising tide of Progressive energy across the country, the new Mayor did not disappoint. His Honor repeated the “Tale of Two Cities” rhetoric of his campaign, which centers on the idea that a parasitic elite class is destroying New York at the expense of everyone else, variously defined as the middle class, working class, or poor, depending on the audience. He also reiterated his plans to raise taxes even higher on the rich.

While it is commonplace for the lofty rhetoric of an inauguration speech to get watered down as time goes by for practical political reasons, it is clear that the results will be bad if the Mr. de Blasio gets everything he wants. Winston Churchill once said “you don’t make the poor richer by making the rich poorer,” yet that is precisely what Mr. de Blasio believes. Readers can conduct a simple internet search and sift through the dozens of articles supporting or denying the contention that higher taxes on the wealthy destroy jobs (with the answer almost always being nuanced, and not binary), but this column shall consider the liberty interests at stake.

Money (and income) is property, and in America people are allowed to utilize their own property in whatever ways they see fit, with the general limit being that they not use it to harm others. One exception to this principle is taxation; individuals surrender money to the government, which then decides through various mechanisms how to spend or utilize the wealth collected. While people often fight about what amount should be paid, only an anarchist would say that people shouldn’t pay taxes at all. There are huge collective action problems that make it much easier for the government to handle national defense and infrastructure problems in a way that benefits everyone.

But what makes taxation work is the proposition that the level of taxation should be value-enhancing for everyone. If a flat income tax rate of 10% is applied to everyone, it isn’t unfair if someone who makes $50,000 a year pays $5,000 in taxes, while someone earning $100,000 a year pays $10,000 in taxes; ideally, the benefits of the public services created (such as parks, roads, schools, security, etc.) will exceed $5,000 for the first person and $10,000 for the second person.

Problems arise though when the tax rates are such that one group receives more in benefits than it pays in taxes at the expense of another group, which pays more in taxes than it receives in benefits; then the system of taxation ceases to add value for everyone and merely becomes a disguised wealth-transfer mechanism. In a democracy, the temptation to levy taxes on anyone just a little wealthier than one’s self is always present, but it must be prevented. Civilized people form a government for their mutual gain, while barbarians use force and numbers to deprive others of their property for their own gain (of course, for an example of how wealth can be transferred by government to certain high income earners, examine how the Federal Reserve’s monetary policy has benefited those Americans wealthy enough to buy securities in the last three to four years).

The situation calls to mind the metaphorical debate in the song “The Trees” by the Canadian progressive rock band Rush. The shorter maple trees cry oppression because the taller oaks absorb most of the sunlight. The maples eventually organize and pass a “noble law” to end “oak oppression.” The song emphatically ends when Geddy Lee sings that the “trees are all kept equal by hatchet, axe, and saw.” While Mr. de Blasio’s method, like that of the maples, could eventually secure equality by dragging everyone down to the same level of wealth, a heavy progressive tax burden is not a guarantee of mutual prosperity and has about as much precision in its implementation as a hatchet.

While Mr. de Blasio brings more sizzle to New York after Mayor Bloomberg’s third term seemed to fizzle out and go flat, his election should not become a clarion call to trample on the liberty of our city’s wealthier inhabitants. Unlike race, which no one would dare to openly discriminate against in government, wealth is not an immutable characteristic. While you might vote in favor of a higher tax for your neighbor who drives a BMW today, you might find out tomorrow that you too must pay more in taxes because you drive a Lexus while the rest of your neighbors drive Fords. And then I can guarantee you’ll be against taxing the “rich.”

*Thomas Warns is a J.D. Candidate, class of 2015, at NYU School of law, Staff Editor on the NYU Journal of Law & Liberty , and author of the weekly column "Consider This a Warning."

Consider This a Warning: Congress Abdicates to the President

Thomas Warns*

The United States government is beset by a crisis in leadership. The simplistic answer often volunteered in the media is that hyper-partisan behavior in Congress (which is often blamed on Republicans) has prevented the federal government from getting anything done. While partisan behavior has always been a gridlock-inducing agent, a far more serious set of intertwined problems are present that will have far worse long term consequences: the abdication of legislative power by Congress and subsequent assumption of increased executive power by the President.

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This trend is not entirely unique to our current government; the reach of the federal government has been expanding since the beginning of the Progressive Era, through the New Deal, and has only continued into the present day. But the abdication of power by Congress seems far less common (it goes against human nature to surrender your power), and has been on display recently with disastrous results. The Wall Street Journal recently wrote about the latest rewrite of the Affordable Care Act perpetrated by the executive branch:

It seems Nancy Pelosi was wrong when she said "we have to pass" ObamaCare to "find out what's in it." No one may ever know because the White House keeps treating the Affordable Care Act's text as a mere suggestion subject to day-to-day revision. Its latest political retrofit is the most brazen: President Obama is partly suspending the individual mandate.

The White House argued at the Supreme Court that the insurance-purchase mandate was not only constitutional but essential to the law's success, while refusing Republican demands to delay or repeal it. But late on Thursday, with only four days to go before the December enrollment deadline, the Health and Human Services Department decreed that millions of Americans are suddenly exempt.

The White House’s neutering of the individual mandate is ironic considering the hysterical cry that emanated from the left-wing media following Republican attempts to change or repeal the law in September and October. Perhaps the most memorable quote was from comedian Jon Stewart, who shrieked “It’s a f***ing law!” while eviscerating the Republicans who opposed it. Of course, Jon Stewart ignores the fact that bad and/or morally wrong laws can be passed, but if his argument holds any weight in regards to Congressional Republicans, it should be even more potent when used against President Obama, who has already repealed or amended numerous sections of his signature healthcare law.

The executive branch has always enjoyed discretion in the enforcement of laws, but the changes unilaterally announced by the Obama Administration – the suspension of the individual and employer mandates, the deadline delays, the protections for Congressional staffers, and the one year extension for “grandfathered” plans – are far beyond an exercise of discretion; President Obama has become a one man legislature. Instead of going through the proper constitutional channels for making laws, he is announcing whatever changes he deems necessary; he has replaced open public debate and voting over policy decisions in Congress with press conferences announcing the changes he drafted behind closed doors. The President’s exercise of the legislative power vested to him nowhere in the Constitution was also evidenced in 2012 when he signed an executive order which basically made parts of the DREAM Act a law, despite the fact that Congress did not pass it.

Equally implicit in this are the members of Congress who allow the President to get away with this. The political motivations for their behavior are clear. Congressional Republicans are content to trumpet the failures of Obamacare and watch as the President continues to compound mistake after mistake with his executive “fixes.” They would like to pass legislation repealing or replacing huge chunks of the law, but can’t get by Congressional Democrats. Many Democrats meanwhile are cooling to Obamacare publicly with the 2014 elections approaching, but must also walk a tightrope which appeases the liberals who still support it while distancing themselves from it as many moderates and millennials turn against it. If President Obama wants to take responsibility for both the failures of Obamacare as well as the feeble attempts to fix it, most Democrats don’t mind.

In the long term however, neither party in Congress is doing themselves or the country a favor by refusing to defend their exclusive legislative powers. Voters have an opportunity to check the President’s power once every four years, but Congress is most capable of defending its authority under Article I of the Constitution from Presidential encroachment. In their wisdom the Framers of the Constitution established a limited government with separated powers and checks and balances; if one branch surrenders its powers to another branch, the balance is upset, powers are no longer separated, and our Republic will look less democratic and more autocratic. If you thought modern day Presidential elections were a big deal, imagine the money and attention they will command when they are for the position of elected king. And imagine what havoc one man could wreak on our precious freedoms with all that power. The NSA could end up being remembered as a pleasant dream compared to the nightmarish developments that would follow. 

*Thomas Warns is a J.D. Candidate, class of 2015, at NYU School of law, Staff Editor on the NYU Journal of Law & Liberty , and author of the weekly column "Consider This a Warning."

Consider This a Warning: Unpaid Interns

Thomas Warns*

Unpaid internships have come under fire recently, as a swell of class action lawsuits have been filed in the last year against companies that use unpaid interns, even whilst the number of unpaid interns reaches close to 2 million people per year. This past week Linda Federica-O’Murchu wrote an article for NBC News articulating the views of defenders and critics of the unpaid internship. While you should read the informative article here, below is a snapshot of the two competing schools of thought:

It's easy to see why unpaid interns are replacing salaried employees at some companies. Employers know they can fill vacant positions with a virtually unlimited supply of bright, hard-working young helpers, and at the same time try them out risk-free for future paid positions. Many interns said they benefit from the arrangement as well, by obtaining valuable on-the-job training and greater employability…

"Interns say, 'I'm just doing this to get my foot in the door of this industry.' But it's not that simple," Glatt said. "We had an unpaid intern picking up performers and driving them to and from rehearsals. Teamsters handle transportation on films. When they found out what was happening, they rightfully reclaimed that job. 

"The interns that are taking out the garbage and sweeping the floor—that's somebody's union job."

Are unpaid internships a valuable part of a young professional’s career or is it just an opportunistic attempt by companies to save money at the expense of full-time employees? Should they be legal at all?

Perhaps complicating the conundrum is the majestic simplicity of the arguments for both sides. On the one side, it seems obvious that people should be paid for their work. Equally obvious is the fact that unpaid internships are voluntary associations, and that workers can gain benefits from employment besides a paycheck. If companies were forced to pay interns the minimum wage, many might opt to do without their help altogether. What is a policymaker to do?

One solution would be to get the government out of the way. As this Forbes article points out, the legal battle to get interns paid centers around the Fair Labor Standards Act of 1938, and the Labor Department’s regulations that followed it. The Labor Department has a six-part test to determine whether an intern should be paid; among the six prongs are requirements that the job has to be “for the benefit of the intern,” the intern doesn’t displace paid workers and the employer “derives no immediate advantage” from the intern’s activities. This amorphous standard basically says that the internship must be for the benefit of the student, not the employer. This is interesting, since most private contracts/business arrangements are entered into on the premise of mutual value. Companies aren’t expected to teach raw college graduates important job skills with no expected benefit, are they?

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Regulations Threaten Mutual Benefit

It may be helpful to glance briefly at what the author did this summer. The author was one of about ten interns in the Major Offense Bureau at the Nassau County District Attorney’s Office (the numbers fluctuated throughout the summer). The County provided no remuneration for interns, although the author received funding from his law school, as did some interns from other law schools; some merely received credits. The first week or so, we had few opportunities to do substantive work, mostly digesting lectures on different crimes which the office prosecuted and observing a variety of motions and hearings. There was also dreaded photocopying. At this stage, our value to Nassau County was probably close to $0 per hour.

By week ten however, the situation had palpably changed. Many of us were gaining valuable experience writing motions and memos to be submitted to the court, or researching a variety of legal topics for Assistant District Attorneys. Some even accompanied ADAs to hearings in order to research cases cited in opposing counsels’ arguments and help form a response. Our value certainly exceeded $0 per hour, but no one thought we were being taken advantage of; the benefits of an automatic second-round interview for a full-time job, building our resumes, and having built important connections with superiors in the office were valuable rewards.

But would the Department of Labor condemn this mutually beneficial arrangement? Is it clear that our employer discerned “no immediate advantage” from our activities? After all, every hour we spent writing a brief or doing research saved a similar amount of time for ADAs to work on different, potentially more important matters. Did the amount of work we performed take away a job from a paralegal or other member of the office’s support staff?   

If the County were forced to pay us the minimum wage because of the Labor Department regulations, we likely would have been on the street with no internship and no paycheck in a heartbeat. It was no secret walking through the shabby courthouse that Nassau County has budget woes, and that intern pay would not be a priority. This would have been a disservice to both sides caused by the regulators trying to help us get paid at least minimum wage.

 

The Minimum Wage and Volunteerism

One pervasive criticism of unpaid internships is that they favor middle and upper class interns who can lean on their family’s wealth while they are not being paid, at the expense of those without such an advantage. But what if the minimum wage law didn’t exist and Nassau County (or other businesses, firms, etc.) could only afford to offer $3 or $4 an hour, enough say for gas to go to and from the internship and buy groceries? This would help bridge the resource gap among interns to an extent, and allow interns more choice in balancing where to work with a wider variety of paid employment. Where employers once cried that they couldn’t afford to pay interns at all, they may suddenly find themselves bidding higher (though potentially still below minimum wage) to secure students from better schools or with more work experience.

What about the union boss who whines about hungry interns taking away union jobs sweeping floors and taking out the garbage? The complaint is ironic, since many unions rely on apprenticeships (a.k.a. unpaid interns) to train new workers, and indeed their jobs wouldn’t be in jeopardy if they didn’t push wages for unskilled labor so high. While it is possible that allowing the interns to usurp these “union jobs” like taking out the garbage and cleaning up on the set of the Black Swan may have been a violation of a contractual agreement between labor unions and Fox Searchlight, it seems unlikely a wily intern had nothing to gain by having such close contact with figures inside the movie industry for an extended period of time.  If the internship was not worth their time and effort, they were always free to quit thanks to the 13th Amendment. Like many other companies, if forced to pay the minimum wage to interns Fox Searchlight might decline to hire interns at all, robbing many young professionals of a chance to gain some exposure to the industry.

If we are so concerned by unpaid internships, should we ban volunteerism as well? Indeed consider the perversity that our minimum wage law creates right now. A boy scout can work to sell baked goods outside a Walmart and raise $4 per hour to finance his Little League baseball team, but if the store manager invited him to come inside and bag groceries for $6 per hour towards the Little League team, he would be vilified as a law-breaker and robber baron – two voluntary transactions, two wildly divergent outcomes. Common sense prevents bureaucrats from banning volunteer activity, but unfortunately common sense is not enough to knife through every set of unhelpful regulations.

 *Thomas Warns is a J.D. Candidate, class of 2015, at NYU School of law, Staff Editor on the NYU Journal of Law & Liberty , and author of the weekly column "Consider This a Warning."

Consider This a Warning: Fracking Stuck on Political Fault Lines

Thomas Warns*

The moratorium on fracking in New York State has entered its sixth year. A recent New York Post editorial argues that fracking could bring major financial benefits to a cash-strapped state where voters recently approved a constitutional amendment authorizing the construction of 7 upstate casinos to create jobs and fill Albany’s coffers. Is Governor Cuomo’s delay blocking a burgeoning business opportunity at a time when New Yorkers need one the most? With State Republican Party Chairman Ed Cox calling for the ban to be re-examined, the New York Post Editorial Board has decided to take Governor Cuomo to task for his delay:

“Cox is right to call the policy of delay environmental Luddism, named for the 19th-century movement that opposed new technology. Even worse is the dishonest way the governor has gone about it: by making a policy out of putting off a decision. In one of the rare truths about fracking to come out of the mouth of a New York official, the state’s environmental conservation commissioner, Joe Martens, summed it up this way: ‘We don’t feel that there’s a great urgency.’

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With Gov. Cuomo still eyeing his chances for a presidential run in 2016, his stonewalling on fracking is not likely to change — at least not until after the Iowa caucuses. There’s probably nothing Cox and his fellow Republicans can do to change that.”

Hydraulic fracturing, popularly called fracking, is a practice that involves injecting water, sand, chemicals, and/or gasses deep into underground shale in order to liberate the natural gas that resides there in abundance. As part of the practice’s promise, the New York Post Editorial Board would likely point to the industry-funded study that found that the fracking boom created 2.1 million jobs in the U.S. last year, added $75 billion to state and federal revenues, and helped line the pockets of homeowners and businessmen alike who benefit from cheaper fuel.

The New York Post however brushes off the detrimental side effects of fracking. Numerous studies have determined that when operating near fault lines, hydraulic fracturing wells can cause minor earthquakes. Likely an even greater threat is the risk of water contamination from fracking; it would be disastrous if the upstate aquifers that keep New York City wet were irretrievably polluted in a search for cheap gas.

It would seem that the New York Post editorial board should be admonished for ignoring the significant risks of fracking, but that doesn’t mean they aren’t wrong to urge Governor Cuomo to quit dodging the issue with the moratorium. The costs of fracking are now more apparent than ever, making a further delay to “study” the issue unhelpful. The delay is pointless and politically motivated, as the state’s environmental conservation commissioner more or less admits. 

The prudent course would be to begin making preparations at once to allow fracking to proceed while making sure its costs are borne by the natural gas companies. The fracking-induced earthquakes have all been minor to this date, but that doesn’t mean they should be ignored or that a larger one couldn’t strike in the future. Private companies could step up by offering groundwater and seismographic surveillance to independently monitor the fracking wells. Homeowners could either enforce their property rights in the courts, or create contractual arrangements with companies that penalize the companies for exceeding acceptable limits on water pollution or earth-shaking. If fracking leads to significant groundwater pollution as many environmentalists fear, rising costs would put a quick end to this controversial drilling technique.

Of course, if these fears aren’t realized, then New Yorkers will benefit economically from an end to the moratorium. Indeed, proponents say that many of the alleged groundwater pollution incidents have alternate explanations that don’t implicate the fracking process itself. If Governor Cuomo believes the costs of fracking can never exceed the benefits, the only other democratically defensible maneuver would be to extend the ban permanently, clearly state the grounds for doing so, and let the political process determine New York’s energy future. Right now, the Governor’s delay is merely dodging accountability with constituents in order to score cheap political points.

 *Thomas Warns is a J.D. Candidate, class of 2015, at NYU School of law, Staff Editor on the NYU Journal of Law & Liberty , and author of the weekly column "Consider This a Warning."

Why You Must Support Obamacare

Thomas Warns*

Don’t believe your own eyes or ears. You may have heard a lot in the news over the past few weeks about how Obamacare has been a massive flop. I’m here to tell you not to think about it. Let me explain to you why the critics are wrong.

The Affordable Care Act will be a tremendous success – who could be against a law providing affordable care for Americans? And I further know it will be a success because none other than the President of the United States has said so.

Yes it might be true that the President lied when he said the “shared responsibility payments” weren’t a tax, and it might be true that the President lied when he said if you liked your healthcare plan and doctor you could keep them, but what is truth in a fight for justice? The President couldn’t risk telling the truth to the American people, because they might not have liked it. A few white lies will be quickly forgotten since the President knows what is best for all of us.

Can you really trust those crazy Republicans and tea-partiers to do what’s right? They are so fixated on the $17,000,000,000,000 national debt that they can’t even see the wisdom of intervening into a multi-trillion dollar market in order to force Americans to buy more expensive health insurance that would be partially paid for with generous subsidies for low-income Americans! Despite reports from the Government Accountability Office saying otherwise, President Obama has given us his word that the Affordable Care Act won’t add a dime to the national debt, just like Social Security and Medicare. While I doubt the President is lying again, if he is, he sure has a good reason to do so for the greater good.

The Obamacare rollout hasn’t been perfect, but you can blame the Republicans for sabotaging it at every stage. A wise Democrat-majority Congress passed the Affordable Care Act in 2010 without a single Republican vote. The Act includes provisions whereby states can make their own healthcare exchanges, or allow the federal government to operate one for them. Making one of these exchanges is simple, evidenced by the federal government’s rollout, but 36 states, including tea-party hot beds like Illinois and Vermont, decided to allow the federal government to create exchanges for them. If they were really team players, they would have made superior healthcare exchanges at the state level rather than allowing the law as written to run its course. Why would supposed states’ rights Republicans in all of these states refuse to act with the federal government holding a gun to their heads and screaming “do this now, or we will do it for you!”? The only explanation is bad faith on their part.

One thing the President does need from you is more time. Imposing a one-size fits all national solution to a massive and complex national marketplace isn’t easy. With only three and a half years to prepare, it shouldn’t be a surprise that there have been some glitches on the healthcare.gov site. We couldn’t afford to delay opening the exchanges and make it look like the law wouldn’t work, even if the site contains glaring security risks and privacy intrusions, and gives customers false price estimates. Individual concerns are unimportant when compared to our overwhelming national interest.

The Constitution clearly states that healthcare is a fundamental right that everyone must be provided with courtesy of the federal government. Well then again maybe it doesn’t state that, but we shouldn’t have to pass an amendment to actually change what that document means in the first place. That right might include a pricey plethora of coverage options you think you don’t need, like pediatric care, maternity care, and substance abuse care, but I told you in the beginning not to think Dr. President Obama has done the thinking for you! Isn’t living in a nanny state easy?

 *Thomas Warns is a J.D. Candidate, class of 2015, at NYU School of law, Staff Editor on the NYU Journal of Law & Liberty , and author of the weekly column "Consider This a Warning."

Consider This a Warning: Time to Re-Think the Income Tax?

Thomas Warns

You may not have noticed, but last Friday our country passed a major milestone: our current income tax regime turned 100 years old. The first income tax was established during the Civil War, but the current regime has existed since October 4th, 1913 following the passage of the 16th Amendment.

CNBC’s Mark Koba wrote about the anniversary:

"One expert sees the 100 years as a system run amok. . . . ‘In 1913, the tax code consisted of 400 pages,’ said Timothy Nash, a professor of free market economics at Northwood University. . . . ‘By 2012, the tax code was 73,608 pages,’ he said. ‘We have gone from a simple tax system to a complex, unfriendly system.’

The tax code is now 185 times longer than it was in 1913, and that creates a host of issues. The National Taxpayer Advocate’s Annual Report estimates that individuals and businesses spend 6.1 billion hours doing their taxes and complying with the tax code annually. Since 2001, there have been more than 4,680 changes to the tax code. The code is so complex that a majority of individuals, unable to navigate the code themselves, hire a professional, and the IRS’ own experts answer tax queries incorrectly about 10% of the time.

These statistics point to some troubling issues. The complexity is literally a drain in both time and money on the economy that costs $168 billion a year on compliance. It is also a haven for tricks by politicians. The complexities and constant changes mean that politicians can point to tax breaks for their constituencies while still getting your money in other less obvious ways. A tax cut for the middle class might be met with a new corporate tax, which gets passed back to consumers when the products they buy cost more money or when employee wages are cut. That’s how politicians can often get away with saying they cut your taxes while also expanding the welfare state – they confuse who pays the IRS with who the tax burden falls on. This past summer we also got to see the tremendous potential for IRS auditors to abuse their power for illegitimate reasons.

Americans understand the importance of paying taxes to support essential government services, but how can we reform the behemoth that is our tax code? The idea has bounced around the USA for decades, but the timing might be right for a flat tax. A true flat tax would have no deductions whatsoever, collecting the same percentage of personal income from everyone. Regulations would still be needed to determine what was considered income, but the code could certainly be small enough for an American to actually be able to read.

Milton Friedman theorized a “negative income tax” which would set simple deductions for a family based on the number of dependents; if the family’s deductions were greater than their income, they would actually get money back from the government. Friedman envisioned that this would replace the current welfare system. Others have advocated abolishing the income tax and replacing it with a sales tax, arguing that abolishing an income tax would make America a haven for business while still taxing the wealthier at a higher rate than the poor (since presumably they would spend more money).

Either way, Americans have options in the ongoing battle to replace the colossal mess that is the U.S. tax code. A flat income or sales tax would be much fairer to all and easier for ordinary Americans to understand; it would also save businesses and individuals billions during tax season. Finally, a simpler tax would probably result in lower taxes for all because politicians wouldn’t be able to hide taxes on their constituents, and that may have the incidental benefit of reducing tax revenues and slimming down the government.

 *Thomas Warns is a J.D. Candidate, class of 2015, at NYU School of law, Staff Editor on the NYU Journal of Law & Liberty , and author of the weekly column "Consider This a Warning."

Consider This a Warning: Is Our Republic in the Emergency Room?

Thomas Warns*

It is no secret that the current healthcare debate taking place in Congress may end up temporarily shutting down the government. As Republicans and Democrats battle over a spending bill and the debate surrounding the future funding of Obamacare intensifies, The New York Times set the stage for a possible government shutdown:

“Without a complete capitulation by House Republicans, large sections of the government would close, hundreds of thousands of workers would be furloughed without pay, and millions more would be asked to work for no pay.
Polls show that the public is already deeply unhappy with its leaders in Congress, and the prospect of the first government shutdown in 17 years would be the latest dispiriting development. With a temporary shutdown appearing inevitable without a last-ditch compromise, the battle on Sunday became as much about blaming the other side as searching for a solution.”
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Ignoring the merits of the Obamacare legislation itself, what does this legislative impasse reveal about how Americans perceive democracy in a Republic? And what should we see as the result of this debate?

Many Americans are frustrated that partisan gridlock seems to have prevented Congress from doing much of anything recently besides passing the Affordable Care Act in 2010. For many this budget debate seems to represent the worst of Congress’ partisan politics, but this sort of all-or-nothing showdown could be exactly what the doctor ordered for stopping future gridlock. If the government does shut down, one party is likely to come out a big winner while the other comes out a big loser.

Midterm elections are a year away, and this debate will significantly shape the outcome. With both parties trying their best to achieve their partisan goals while blaming the other party for a potential shutdown, it seems like the “winning” side could stand to take a larger share of seats in Congress. Democrats largely believe that the 2012 elections were an unconditional victory, however, the Republicans still control the House of Representatives – if Congress unites wholly under one party, it would be much easier for legislation to make it to the President’s desk.

Both parties claim that they are speaking for the majority of Americans; clearly at least one of them is wrong, but perhaps they both are. Only 57.5% of Americans eligible to vote actually did so in 2012. Since the election was close to a 50-50 split (roughly speaking) of those who voted, neither side can plausibly say that they represent a majority of the country’s citizens.

America’s political system is obsessed with the idea of majority rule, but the fact is that no such majority political consensus exists nationally. The Tea Party members behind the defund Obamacare movement constantly take flak for allegedly hijacking the nation’s political system by trying to wield influence that exceeds its base of support. But the Tea Party is merely just one minority group among many trying to exert its influence to the maximum extent possible.

Should we be concerned or surprised when a small but dedicated movement is able to score legislative victories at a greater pace than a larger but apathetic plurality? Certainly not. We expect and receive more input on legislation from the people who are most affected by it and who care about it the most. That is normal, just as it is normal for the EPA to receive more feedback from the automobile and trucking industry than from the general public about newly proposed improved emissions standards for cars and trucks.

John McCain recently said that he would not defund Obamacare because the American people “spoke” and Congressmen need to “respect the outcomes of elections because they reflect the will of the people.” But his view of democracy doesn’t make sense in a Republic. Nationally President Obama was re-elected running in support of Obamacare, but the House of Representatives has 232 Republicans and the Senate has 46. Should Ted Cruz vote in favor of Obamacare after being elected on a platform staunchly opposed to it because voters in states he doesn’t represent support it? Absolutely not.

So what does this all mean? It means that a government shutdown followed by a political “win” for one party is not necessarily a sign of dysfunction in Washington, but could actually demonstrate that our Republic is operating just fine and that Congress might start working more smoothly after the midterm elections.

 

*Thomas Warns is a J.D. Candidate at New York University School of Law, class of 2015, and is Staff Editor of the Journal of Law & Liberty. Mr. Warns is author of the weekly column "Consider This a Warning". 

Consider This a Warning: Get Heated Millennials

Thomas Warns*

Megan McArdle, a columnist for Bloomberg View, recently wrote a piece titled “Hey Millennials: You Got a Raw Deal. Get Over it.” In it, she responds to some of the complaints from Generation Y by writing:

“In other words, while it’s true that there are fewer guarantees than there used to be, it’s not true that everyone in the good old days had an easy path to lifetime employment. Those people were always a lucky minority. They still are, if a somewhat smaller one. Most people in the generations before the millennials had to struggle. They were afraid they wouldn’t be able to make it. They, too, were woken up in the wee small hours by their own economic terror.”
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Ms. McArdle backs up her beliefs with both anecdotal and empirical evidence, and reminds readers that because of persistent racism prior to the Civil Rights movement successful careers were often reserved for White males. While it is unquestionably true that previous generations had to struggle for employment and were often denied the American Dream because of the color of their skin, should millennials “get over” the raw deal they are receiving?

Let’s set the record straight here: millennials are not just growing up into a tough economy – they are growing up in an economy that is particularly tough on them. Unemployment for people aged 16-24 is estimated at 16.3% by the Bureau of Labor Statistics, more than double the national average. In 2011 a Pew Research study revealed that the wealth gap between those over 65 and those under 35 had doubled since 2005. Moreover, a family whose head of household was 65+ years old had a net worth 47 times greater than a household headed by a 35-year-old.

The 2011 Pew Research study illustrates a disturbing trend: the old are getting richer and the young are getting poorer. Largely, this trend is the result of a bloated and dysfunctional entitlement system. Retirees have been promised far more money than they contributed to the system. Due to decades of government mismanagement, the money they contributed is essentially gone, which places the burden of payment on the present generation of young workers. Not only are millennials struggling with rising student loan debt and finding a job in a particularly tough economy, but they will also be expected to foot the bill for retiring seniors who by and large have far more money than they do. Because social security is not means-tested, even billionaires like Ken Langone are paid once a month. Generation Y is often labeled as narcissistic, but is it narcissistic to expect not be robbed as a generation?

Millennials should get worked up about their circumstances. This comparison may seem a bit over the top, but millennials should revolt against this taxation without representation like the Founders of our country. Before we were born or old enough to vote, our elders created a system where they received benefits - financed by deficit spending - which our generation will have to pay for. That sounds a lot like taxation without representation to me. Sorry Megan, but we are not going to get over it.

 

*Thomas Warns is a J.D Candidate at New York University School of Law, class of 2015, and Staff Editor of the Journal of Law & Liberty