Tuesday, July 22, 2014

Decision in ACA court case.

A decision on the ACA tax credit:

An ACA court case that I described in a previous post has been decided.

My thoughts from the time this case was filed are presented below. 

I have moved to Denver and am still unpacking.  One of my first posts next week will be on the ramifications of this case.

More ACA litigation

This article on litigation brought by business groups attempting to overturn key aspects of the ACA is fascinating. This post provides a quick summary of the litigation and my comments.

Summary:  Plaintiffs in at least two court cases argue that tax credits for the purchase of health insurance in state exchanges are only available for insurance sold on health exchanges established by the state.   According to this argument, tax credits are not allowed in states that refused to set up an exchange and left the task to the federal government.

Plaintiffs argue that the lack of a tax credit for the purchase of health insurance in certain states makes other key aspects of the ACA invalid or less applicable.

o   Since penalties imposed on employers who fail to provide health insurance are only triggered if employees received tax credits the employer mandate does not exist in states that do not create an exchange.

o   The individual mandate does not pertain to households if health insurance is unaffordable.  A policy is deemed unaffordable if premiums exceed 8.0% of income.  The lack of a tax credit would result in health insurance premiums exceeding the 8.0% threshold.  These households are not required to purchase health insurance.

This situation arose because the Senate version of the ACA was enacted after the Democrats lost the Massachusetts Senate seat. The Plaintiffs argue that this interpretation accurately reflects the intent of the Senate bill, which became the basis for the ACA.  The IRS has argued that Congress intended the tax credit to apply both to states that created their own exchange and states where exchanges were created by the Federal government.  The plaintiffs argue the plain language of the law states otherwise.


Comment One:  Very clever!!!

Comment Two: If the plaintiffs win their case states would still be subject to rules banning pre-existing conditions and underwriting based on health status.  However, a key subsidy for mitigating the costs associated these changes would not be available in states that did not establish an exchange.

Comment Three:  Is this the way laws are made in Washington?   What is the gang of eight currently putting in the immigration bill?  Would the Administration also capitulate on key language in order to achieve a comprehensive budget deal?  I hope that the progressive Democrats in the Senate are willing to scuttle the immigration law and a budget deal or any future legislation unless there is clarity on key provisions.

Comment Four:  There have been a number of instances where the IRS has had to interpret aspects of the ACA.  (Instances include regulations governing eligibility for a tax credit when small employers offer health insurance and rules governing the value of benefits that a large firm must offer.)  The IRS tends to argue that the plain language of the statute requires them to rule in a narrow way.  In this case, the IRS rules they had authority to more broadly interpret the statute.  I tend to find that previous IRS rulings lacked credibility and common sense.

Comment Five:  The business groups arguing this case want to deny the citizens of their state a valuable tax credit; thereby, increasing the cost of health insurance for individuals in their state.  A ruling overturning tax credits and the employer mandate could actually benefit the Democrats politically. Opponents of the ACA that are bringing this court case need to be careful what they wish for!!!!

Comment Six:  The DC circuit court could play the key role in deciding this case.   Last I heard there were four vacancies on this court.  This is not payback for Bork.  This is unprecedented.  Senator Reid and President Obama need to take a stand on their judicial nominees.  The time for compromise on this issue is long past.  Senate rules need must be modified to allow up or down vote for judicial nominations after a certain point in time.

#DC circuit
#Affordable Care Act

Saturday, July 19, 2014

Oldest Men versus Oldest Women -- implications

The oldest man in the world died a few months ago.  He was 111 at the time of his death.

At the time of his death 66 women were older than him.

This article motivated me to provide some quick thoughts on life expectancy, retirement planning and Social Security.

Some thoughts:

Longevity risk – the possibility that a person might outlive his or her resources – is a problem for both males and females.  But the risk of outliving ones resources is more severe for women than for men.

See my previous daily math problems on gender, retirement planning and annuities.

The issue of longevity risk is – or at least should be – an important factor guiding the debate on altering Social Security.  Social Security provides an inflation adjusted lifetime annuity.  Most proposals to shore up the finances of Social Security involve cutting benefits.   Social Security benefit cuts of any type increase longevity risk.

One commonly proposed benefit cut involves reduction of the Social Security COLA.  Reductions in Social Security COLAs will most adversely impact finances for individuals who live the longest. 


The Republican approach to Social Security favored by Shelly Moore Capito would create private accounts. 

Under the current Social Security system men and women receive the same annuity despite the longer life expectancy for women.  Under a market orientated approach women with their longer life expectancy would likely receive a lower annuity payment.

I do not believe the Republican approach to Social Security is evidence of a war on women.   But the Republican approach is much better for men than for women.

#Shelly Moore Capito
#Social Security
#life expectancy

Wednesday, June 11, 2014

Forced Condominium Sales in Florida

A disturbing article on forced condo sales.

A June 10, 2014 CNBC article discusses the plight of Florida Condo Owners who might be forced to sell their homes even though they are current on their mortgage.

Florida state law allows termination of a condominium when 80% of the owners support termination.   The law used to require 100% support. 

 One owner in the article will be forced to accept $40,000 even though she owes $90,000 on her mortgage.


People buy a home in order to lock in future housing costs.   What is the point of home ownership if you can be forced to sell and forced to move?

Why should condominium owners have fewer rights than owners of other forms of real estate?

Could a town pass a law requiring all homeowners to sell if 80% of voters wanted a sale to occur?

How does allowing a group of investors the right to force home sales of some condo owners protect homeowners from financial problems caused by a hurricane?   

Couldn’t financial risks stemming from a large loss in property value be more effectively reduced by allowing cram downs on mortgages when house values fall precipitously?


I see few benefits from a law that allows a group of owners in a community to require other owners to sell their property.  This is not an eminent domain issue where the public gains from a new project.  Even when there is a grand public use for property seizures should occur sparingly.

What is happening in Florida is that a group of investors has noticed that real estate is reaching its nadir and is buying.  Once they have a majority status they are legally entitled to get the other homes at bargain prices.  It is similar to a merger situation where once a hostile takeover occurs minority shareholders are forced to sell.  Of course, minority shareholder who are disappointed in the price they receive for stock in one company in their portfolio still have a place to live.

The way to help people who are decimated by natural or financial disasters is to allow a cram down in a mortgage.  Unfortunately, the mortgage industry and their paid consultants have successfully exaggerated the impact of this sensible policy change on interest rates.

Some people claim that we are approaching another real estate bubble.    This article suggests that fears of a new real estate bubble are exaggerated.  In Florida and elsewhere there are people who bought their house ten years ago or or eight years ago who are still underwater.    The case could be made for some Fed tightening because of the stock market but certainly  not for real estate.

The main lesson I get from this sad article is that rules really are stacked against normal people and in favor of the investor class.


Monday, May 5, 2014

Kicking Russia out of the WTO

Kicking Russia out of the WTO

The New York Times had an interesting article today on efforts by Ukraine to obtain natural gas from Slovakia.

The Tines article asks the question

“Why has it been so difficult to prod tiny Slovakia, a European Union member, to get a technically simple and, for Ukraine and for the credibility of the 28-nation bloc, vitally important venture off the ground?”

A Partial Answer in the Next Section:

“Some cite legal and technical obstacles, others politics and fear of crossing the Kremlin, but all agree that a major obstacle has been the power and reach of Gazprom, which serves as a potent tool for advancing Russia’s economic and geopolitical interests, and is ultimately beholden to President Vladimir V. Putin.”

My Comments:

Comment One:  In the 1990s and the early 2000s there was significant interest in the construction of pipelines that would have routed oil and natural gas in routes outside of Russia.  See my review of a book that has a discussion of plans for oil pipelines through the Caspian.

Plans for these pipelines were abandoned.  Putin with the help of the Federal Security Service has intimated leaders of his smaller neighbors.  Neither President Bush nor President Obama nor European leaders appeared to fully appreciate the importance of these alternative routes for energy.  It appears as though Putin really played the west. 

I would love to know the full history of the capitulation by western nations on energy issues in the former Soviet Union.  (Basically, historians need to ask “Who lost the Caspian Sea?  Who lost the Ukraine?”)

Comment Two:  In theory, free trade and trade agreements benefit mankind and all nations.  The theory relies on the existence of competition (or at least rivalry) among firms unimpeded by coercion.  The existence of political pressure backed by threats of economic or military actions to stifle trade among or between other countries is not consistent with the conditions that result in trade increase living standards throughout the world.

Comment Three:  The debate in Washington has centered on whether Russia is complying with its obligations of the WTO.

This debate needs to be broadened to more broadly consider Russia’s conduct and its impact on competition throughout the world.

Comment Four:  Many economists believe that U.S. values on labor standards, on the environment, on human rights should not impede the creation of new free trade deals.

You have to read this 1991 memo by Lawrence Summers:

Is this the whole memo or is there more?

I wonder if advocates of free trade believe in free trade even when coercive actions by signatories of the trade agreements make truly free trade impossible.

Comment Four: Today a terrorist in Nigeria announced that he was going to “sell” many young girls that he kidnapped.

Some quotes from the CNN article.  (Wow!  CNN managed to place on article on something other than the missing Malaysian flight or a bigoted basketball team owner on its site.)

"I abducted your girls. I will sell them in the market, by Allah," a man claiming to be Boko Haram leader Abubakar Shekau said in a video first obtained by Agence France-Presse. "There is a market for selling humans. Allah says I should sell. He commands me to sell. I will sell women. I sell women," he continued, according to a CNN translation from the local Hausa language.

Many nations look do not fully cooperate in efforts to curtail trafficking is sex slaves.   Should trade with countries that participate or refuse to help stop trafficking in sex slave be restricted?

I believe that the answer to this issue is yes.  But this action requires that morality obtain primacy over the desire for unrestricted trade. 



#Boko Haram