Wednesday, November 12, 2014

King v. Burwell: Originalism versus the Living Constitution

Ever since last week when the Supreme Court of the United States accepted the Obamacare “insurance subsidies” case, I’ve been asked to explain what the statutory construction question will be before the Court, and what it’s ruling should and will likely be next spring. I had intended to write on that topic soon, but instead I offer the following as an intelligent discussion of what the King case is all about. Note the last sentence of Mr. Rosman’s excellent article, which I have italicized. We’ll see, probably in June, just how many Originalists there really are on the High Court. (To learn more about Originalism, see my book The Supreme Court Opinions of Clarence Thomas, 1991-2011 at

Posted: 11 Nov 2014 07:25 AM PST

Michael Rosman is General Counsel at the Center for Individual Rights and is among counsel to several senators and representatives as amicus curiae urging review in King.  

King v. Burwell is being touted by the popular press as a case of enormous import. It is, we are led to believe, an attack on the Affordable Care Act that, if successful, will undermine the entirety of that statute’s regulation of the private insurance market. Whether that is true or not remains to be seen. I have some doubts. What each state will do if faced with the prospect that its citizens will no longer get subsidies to buy insurance if it does not establish and operate an insurance exchange is entirely unknown.   

Moreover, even a victory by the government will hardly guarantee the ACA’s success in regulating the private insurance market. For one thing, a decision upholding the IRS regulation that authorizes subsidies even in states where the federal government operates an exchange might conclude that the statute is ambiguous and that the IRS is entitled to deference. (It is hard to imagine a decision upholding the regulation that would conclude that the statute is crystal clear.) If so, a subsequent administration that disagrees with the current interpretation could simply change it. If a decision favoring the plaintiffs would lead to the statute’s demise, so would a change in the regulation.

So King v. Burwell may not be quite as consequential for public policy as many would have us believe. It can, though, be quite important for the development of the law, and, more specifically, the “plain meaning” rule that requires that statutes generally be interpreted in accordance with their plain meaning. Two important issues are raised by the decision. First, how broad is the “absurdity” exception to the plain meaning rule? Second, to what degree and extent should the unusual factual circumstances that led to the ACA’s passage affect the operation of the plain meaning rule?

As to the first, the statute in question plainly provides that, in calculating the size of a subsidy, one must begin with the monthly premium of a qualified health plan offered in the individual market within a state that someone enrolled in “through an Exchange established by the State under Section 1311 [of the ACA].” “State” is a defined term under the Act and plainly does not mean the federal government.

The “plain meaning” rule, though, has a well-known exception that permits a court to depart from the plain meaning of a statute when the result would be an absurd one that Congress could not possibly have meant. The question, though, is how “absurd” a result must be before the exception kicks in. Generally speaking, the Court has kept the exception narrow, since, after all, a broad understanding of what is “absurd” would give courts more opportunities to second-guess Congress’s words.

In King, the federal government does not seriously argue that it would be absurd for Congress to limit subsidies to individuals in states that have state-operated exchanges (although it does argue strenuously that that is not what Congress meant). Rather, it suggests that there are other provisions of the ACA that would be rendered absurd if the phrase “Exchange established by the State” were given its plain meaning. (Whether an absurdity in a different provision should be sufficient to reinterpret a phrase away from its plain meaning in the relevant section is another question, and one that space precludes me from elaborating upon.)

For example, the government argues, Section 1312 of the ACA (42 U.S.C. § 18032) provides that “[a] qualified individual may enroll in any qualified health plan available to such individual.” That section defines a “qualified individual” as one who seeks to enroll in a qualified health plan offered through an exchange and “resides in the State that established the Exchange.” How can it be, the government argues, that only individuals who reside in states that offer state-run insurance exchanges can be “qualified individuals” and thus eligible to purchase a qualified health plan? Well, the answer goes, Section 1312 does not state that individuals who live in states with federally-run exchanges cannot buy health plans. It just identifies some of those in the states with state-operated exchanges who can.

Now, one might wonder why Congress would only identify eligibility requirements and/or choice rights for those living in states that have state-run exchanges. There are plausible answers to that question – perhaps the most plausible is that Congress expected the states to establish and operate exchanges and did not give as much thought to what would happen in the event that some did not – but even if there were not, it is not at all clear that the requirements of the absurdity exception would be met. Is it really absurd if Congress only set forth the requirements and rights for one group (people living in states with state-run exchanges) and not the other (people living in states with federally-run exchanges)? This, I think, would stretch the absurdity exception greatly. The fact that we may not fully understand why Congress said what it said does not make what it said absurd in the usual sense of that word or past precedent.

The second issue relating to the plain-meaning rule raised by King is whether the unusual legislative history of the ACA should affect its application. As many may remember, the House and Senate passed significantly different healthcare bills at the end of 2009. Many provisions were no doubt included with the assumption that they would be amended in negotiations between the House and Senate.   But when Scott Brown was elected to the Senate from Massachusetts and the Democrats lost their filibuster-proof majority in that body, the supporters of the bill had a choice: try the reconciliation process anyway (either before or after Brown was seated) or pass one of the two bills already on the table. They opted for the latter. The House passed the Senate bill on March 21, 2010, and President Obama signed it into law two days later. Modest amendments were made through a budget reconciliation process that could not be filibustered but permitted only limited changes.

The government and supporters of the bill seem to argue that this history is a reason to reject the plain meaning of the statute. Everyone knows what we really wanted, they suggest, and it certainly was not to undermine the ACA by limiting subsidies. My organization, along with our co-counsel (Cooper & Kirk and The Judicial Education Project), representing various U.S. senators and representatives, took a different approach in the amicus brief that we filed. Our clients believe that the unusual nature of the history of the bill makes it all the more important to apply the plain meaning rule. Trying to figure out what supporters of the law might have done if they had had the votes to do it is a fool’s game. The plain words of the statute are the only things that members of the two Houses of Congress voted on, and it’s all that can govern an agency’s interpretation of the statute.

Tuesday, November 11, 2014

The Alan Greenspan Story (Part II): The Long Way Home?

In March 2009 I wrote and posted on this blog the article which appears under the asterisks below. Although it disappeared, thanks to some of the recipients of this blog I have it again. I’m reprinting it now for two reasons: First, because hundreds of people have joined this blog since I posted the essay five years ago and have never seen it. Second, because per the title of today’s blog, Alan Greenspan may in his old age be returning to a belief in first principles regarding “gold (and silver) and economic freedom.”

Here is an excerpt from Mr. Greenspan’s recent appearance at the Council on Foreign Relations. (Asterisks signify material I have omitted. For the entire transcript, see Transcript. I have added the emphasis.)

Alan Greenspan on Central Banks, Stagnation, and Gold.
A Conversation with Alan Greenspan.

Speaker: Alan Greenspan, President, Greenspan Associates LLC; Former Chairman of the Board of Governors, Federal Reserve System
Presider: Gillian Tett, U.S. Managing Editor, Financial Times
October 29, 2014, New York
Council on Foreign Relations 

This is [an excerpt from] the corrected transcript of the meeting in its entirety.

TETT: OK, well, good morning, everybody, and welcome to this morning's breakfast debate with Chairman Greenspan. My name is Gillian Tett. I'm the U.S. managing editor of the Financial Times, so I hope you've all got your free copy of the FT out in the lobby.
*          *          *
TETT: I'm going to turn to the audience for questions in one minute, but before I do though, I just want to ask though, one of the really interesting chapters in your book is about gold. And there's been a lot of media debate in the past about your views on gold.

You yourself pose a question as to why would anyone want to buy this barbarous relic -- I don't know whether John Paulson is in the audience -- but it's an interesting question. But do you think that gold is currently a good investment given what you're saying about the potential for turmoil?



TETT: Do you put...

GREENSPAN: Economists are usually perfect in equivocating. In this case I didn't equivocate. Look, remember what we're looking at. Gold is a currency. It is still by all evidences the premier currency where no fiat currency, including the dollar, can match it. And so that the issue is, if you're looking at a question of turmoil, you will find, as we always have in the past, it moves into the gold price.
But the gold price is actually sort of half a commodity price, so when the economy is weakening, it goes down like copper. But it's also got a monetary characteristic which is intrinsic. It's not inbred into human beings -- I cannot conceive -- of any mechanism by which you could say that, but it behaves as though it is.

Intrinsic currencies like gold and silver, for example, are acceptable [with]out a third party guarantee. And, I mean, for example at the end of World War II, or just at the end of it, Germany could not import goods without payment in gold. The person who shipped the goods in would accept the gold, and didn't care whether there was any credit standing -- associated with it. That is a very rare phenomenon. It's -- it's the reason why, for example, in a renewal of an agreement that the central banks have made -- European central banks, I believe -- about allocating their gold sales which occurred when gold prices were falling down, that has been renewed this year with a statement that gold serves a very important place in monetary reserves.

And the question is, why do central banks put money into an asset which has no rate of return, but cost of storage and insurance and everything else like that, why are they doing that? If you look at the data with a very few exceptions, all of the developed countries have gold reserves. Why?
TETT: I imagine right now, it's because of a question mark hanging over the value of fiat currency, the credibility going forward.

GREENSPAN: Well, that's what I'm getting at. Every time you get some really serious questions, the 50 percent of the gold price determination begins to move.

TETT: Right.

GREENSPAN: And I think it is fascinating and -- I don't know, is Benn Steil in the audience?

TETT: Yes.

GREENSPAN: There he is, OK. Before you read my book, go read Benn's book. The reason is, you'll find it fascinating on exactly this issue, because here you have the ultimate test at the Mount Washington Hotel in 1944 of the real intellectual debate between the -- those who wanted to an international fiat currency which was embodied in John Maynard Keynes' construct of a banker, and he was there in 1944, holding forth with all of his prestige, but couldn't counter the fact that the United States dollar was convertible into gold and that was the major draw. Everyone wanted America's gold. And I think that Benn really described that in extraordinarily useful terms, as far as I can see. Anyway, thank you.

 *          *          *


The Alan Greenspan Story: From Objectivist to Statist

In the mid-1960s my wife, Erika Holzer, and I were members of a small circle the hub of which was Ayn Rand, whose magnum opus, Atlas Shrugged, had been published in 1957.

Another member—who by then had been associated with Rand for several years—was Alan Greenspan.

In addition to our social relationship with Rand we were also her lawyers, so frequently we made “house calls” to her apartment to conduct legal business. On more than one occasion when Erika and I arrived, Ayn and her husband would be finishing a private dinner with Alan Greenspan. It was apparent to us that Ayn had a special relationship with him, an impression buttressed by comments Ayn made occasionally to the effect that Alan was a brilliant man.

In those days, Rand and her erstwhile “intellectual heir,” Nathaniel Branden, edited and published The Objectivist, a journal devoted to expounding and disseminating her ideas.

One was allowed to write for The Objectivist only if the content was in accordance with Rand’s philosophy, and could withstand the laser-like editorial scrutiny she unmercifully delivered (but to the great advantage of the essay’s author). Erika and I were victims/beneficiaries of Rand’s almost supernatural abilities as a non-fiction editor.

In the July 1966 issue of The Objectivist there appears an essay entitled “Gold and Economic Freedom.” Its opening paragraph is as follows: “An almost hysterical antagonism toward the gold standard is one issue that unites statists of all persuasions. They seem to sense—perhaps more clearly and subtly than many consistent defenders of laissez-faire—that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.” (My emphasis.)

The essay goes on to explain the role of gold in a free society, the meaning of money (see my Blog of February 12, 2009), and the history of the Federal Reserve System. Then, the author notes critically that “[w]hen business in the United States underwent a mild contraction in 1927, the Federal Reserve created more paper reserves in the hope of forestalling any possible bank reserve shortage. * * * The Fed succeeded: it stopped the [British] gold loss, but it nearly destroyed the economies of the world, in the process. The excess credit which the Fed pumped into the economy spilled over into the stock market—triggering a fantastic speculative boom. Belatedly, Federal Reserve officials attempted to sop up the excess reserves and finally succeeded in braking the boom. But it was too late: by 1929 the speculative imbalances had become so overwhelming that the attempt precipitated a sharp retrenching and a consequent demoralizing of business confidence. As a result the American economy collapsed.” (My emphasis.)

The balance of “Gold and Economic Freedom” emphatically endorses the gold standard, disdains government interference in the economy, and condemns the statists who repudiated the former while fostering the latter.

The essay’s penultimate and concluding paragraphs eloquently reiterate this point: “In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold [see my Blog of January 25, 2009]. If everyone decided, for example, to convert all their bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves. This is the shabby secret of the welfare statists’ tirades against gold. Deficit spending is simply a scheme for the ‘hidden’ confiscation of wealth. * * * (My emphasis.)

The author of “Gold and Economic Freedom” is, of course, Alan Greenspan.

The “statists” whom Dr. Greenspan rightly condemned are adherents to, and promoters of, “statism”: “concentration of economic controls and planning in the hands of a highly centralized government often extending to government ownership of industry.” (Merriam- Webster Dictionary, On Line).

Or, as Greenspan’s editor, Ayn Rand, once explained it: “The political expression of altruism is collectivism or statism, which holds that man’s life and work belong to the state—to society, to the group, the gang, the race, the nation—and that the state may dispose of him in any way it pleases for the sake of whatever it deems to be its own tribal, collective good”: (“Introducing Objectivism,” The Objectivist Newsletter, August 1962, p.35).

Since it was Ayn Rand herself speaking through Alan Greenspan in “Gold and Economic Freedom” in the author’s lauding of laissez-faire and condemnation of statism, it was incredible that he accepted Gerald Ford’s appointment as Chairman of the President’s Council of [three] Economic Advisers.

Putting aside four of the Council’s main duties and functions, the fifth is “[t]o develop and recommend to the President national economic policies, to foster and promote free competitive enterprise, to avoid economic fluctuations or to diminish the effects thereof, and to maintain employment.”


An acolyte of the political philosopher who, among other achievements, built a moral foundation for capitalism, signing on with a statist President to “develop national economic policies” (like the bureaucrats in Atlas Shrugged?), “to foster and promote free competitive enterprise” (through stricter anti-business anti-trust laws?), “to avoid economic fluctuations” (by wage and price controls?), and “to maintain employment” (with FDR-like public works projects?)?

Not only did Greenspan sign on with Ford, but Rand signed on with the both of them—sanctioning the new Greenspan-Ford economic partnership by her glowing presence at the new Chairman’s White House swearing-in ceremony.

Soon after Rand died, President Reagan put Greenspan in charge of a boondoggle called the National Commission on Social Security Reform. One of its recommendations was an anti-laissez-faire, pro-statist, large tax increase.

Then came the Fed job, making Greenspan the world’s economic/financial puppet master.

According to a 2007 speech by a Federal Reserve Board member Frederic S. Mishkin, “In a democratic society like our own, the ultimate purpose of the central bank [the Fed] is to promote the public good by pursuing a course of monetary policy that fosters economic prosperity and social welfare. In the United States, as in virtually every other country, the central bank has a more specific set of objectives that have been established by the government. This mandate was originally specified by the Federal Reserve Act of 1913 and was most recently clarified by an amendment to the Federal Reserve Act in 1977. According to this legislation, the Federal Reserve's mandate is “to promote effectively the goals of maximum employment, stable prices, and moderate long-term interest rates.” (My emphasis.)

So for year after year, the fallen pro-laissez-faire, anti-statist, Objectivist, Chairman of the Fed, went about pulling on the Fed’s strings, doing the government’s business of “promoting the public good” and “fostering social welfare.”

Repudiating everything he had written, and Rand had sanctioned, in “Gold and Economic Freedom,” Greenspan manipulated the “creation” of “money,” opened and closed the credit valve, and virtually if not actually controlled the economic/financial system of the United States and thus of the world.

And then, finally, at the end of 2008 when the system imploded, Rand’s brilliant acolyte finally confessed . . . and his confession continues: Yes, he was wrong about self-regulating capitalism. Yes, this time laissez-faire didn’t work. Yes, the bailouts were/are necessary. Yes—and that noise you hear is Ayn Rand spinning in her grave—the government must now nationalize banks (in the “public interest, and only “temporarily,” of course).

And with these unrepentant anti-capitalism confessions, Alan Greenspan is nakedly exposed for what he became when first he drank from the inebriating waters of the Washington trough, abandoning not only “Gold and Economic Freedom,” but the moral principles which it implies, and about which he wrote with Rand’s approval those many years ago.

Alan Greenspan is a person whom he, and Ayn Rand, deplored: just another statist.