Monthly Archives: July 2014

Poison Pill

A “poison pill” is a clause added to a contract with the express intent of providing a disincentive for anyone affected by that contract to contest it. It is typically employed when one anticipates animosity or disagreement among the parties (such as a Will where a beneficiary might be dissatisfied with their inheritance). In other words, it’s a legal stick (as opposed to carrot) used to keep otherwise discordant individuals in line. Unsurprisingly the most contentious legal artifact in recent memory, Obamacare, contains just such a legal provision. Naturally political prudence demanded that the punitive measure remain carefully camouflaged. Otherwise the Feds ran the risk of their private beliefs becoming public knowledge, namely that Federal paternalism gives them the right to punish impudent states.

A poison pill provision in Obamacare was recently unearthed in the wake of a ruling early last week by a D.C. Circuit Court (Halbig v. Burwell) which stated that contrary to an IRS rule and the Obama administration’s contention, the plain language of the Obamacare statute says that subsidies for health insurance were limited to STATE-run health exchanges (and therefore subsidies are not possible in exchanges created and run by the Federal government). There was of course an immediate howl of objection by the administration and those on the left. They said that this was silly, clearly that is not what Congress meant – even if they used very simple and unambiguous language to the contrary – of course they meant to include federal exchanges as well, silly rabbit, only some backwards troglodyte would think otherwise. Funny thing how selective memory works; anything that might contradict your current position is conveniently forgotten. So it was rather embarrassing indeed when it was found that in 2012 (long before this suit was initiated), a Jonathan Gruber (an MIT economics professor who played a key role in drafting Obamacare) was recorded (twice) unequivocally endorsing the very core of that ruling – that only state exchanges were eligible for subsidies. But it wasn’t that admission that was the most telling, but rather what followed.

 

“What’s important to remember politically about this is if you’re a state and you don’t set up an exchange, that means your citizens don’t get their tax credits—but your citizens still pay the taxes that support this bill. So you’re essentially saying [to] your citizens you’re going to pay all the taxes to help all the other states in the country. I hope that that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges.” Jonathan Gruber, 1/18/2012

 

He clearly admits that this circumstance (no tax credits) is intended to influence state behavior in order to compel them (get their act together) to carry out the demands placed upon them by this legislation. This language was no mistake, no typo, no oversight; it was clearly intended to act as poison pill to keep the contentious “red” states in line. But then something unexpected happened. Overwhelming civil disobedience. A majority of states (34) chose to swallow that politically poisoned pill anyway. Uh-oh, now what to do we do? Establish federal exchanges and pretend that the poison pill language was a typo. Nothing to see here, move along, move along.

Even if one is inclined to believe it’s all just a big misunderstanding and perhaps only Gruber thought it had this purpose, then that still means the law as plainly written diverges from the intentions of Congress. So how do we fix bad law in this country? Apparently now we allow the executive branch (the President) to unilaterally change it to fit his own subjective interpretation. Extend this deadline, remove this penalty, change the rules, all at his whim.

It certainly is much easier to rule and get things done if you don’t have to deal with a pesky Congress that would never permit such a change without also compelling other, less ideologically palatable, changes. Who needs the slow and incremental rule of law when you can have the fast and instantaneous rule of man? As Mel Brooks said, “It’s good to be the King.”

Invisible Borders

The recent influx of unaccompanied immigrant children has once again brought discussions of borders and immigration to the top of the brewing cauldron of crisis de jour news reporting. The xenophobic response as usual gets the most play with calls to “send them back,” and “seal the border,” accompanied with just a dash of fear-mongering regarding “disease”. Considering America’s sordid history of erecting legal barriers to immigration, (often hypocritically spearheaded by the descendants of the previously disfavored group) nothing is perhaps more American than rallying to the cry of “keep out them ‘ferners!”. This response is actually not so surprising when you consider there is no greater threat to majority rule (i.e. democracy) than new people who can transform a majority into a minority. America’s immigration policy is not about extending our ideals of equality, fairness or justice to newcomers; it’s about power and who has it. If the system of governance (democracy) is built on a foundation of denying a basic human right (movement) in order for that system to continue serving those in power, then there is something foul within that system.

Everyone has the right to move and go wherever they please insofar as they are not trespassing upon the justly acquired property rights of another. Ah! So that settles it then – America is “ours”, so our property rights in it allow us to establish a border and keep people we don’t like out. Not so fast. Part of the problem is the imprecision of the English language. We can say “this is my school, team, job” etc. without meaning literally we think we own those things. However, when those possessive pronouns are applied to our localities (“this is my city” or “ this is my country”) most fall sway to the fantasy that the geographical coordinates of their residence conveys to them an undiluted ownership interest in an arbitrarily defined area surrounding said residence. Thus they conclude they have a “right” to have a say in what products may be sold, what wages may be paid, what businesses may exist, how buildings and homes can look, what moral code must be followed, and lastly, who may be permitted to enter this ill defined fiefdom. This is the foundation upon which statism and communal governance is founded: you’re near me, so I get to tell you how to live, and your refusal to move I take as tacit agreement with these rules.

The reality is that borders are a fiction. If you don’t believe me, just look at a photo of the Earth from orbit. I have yet to find “America” printed across the Rockies. This is not to diminish the legitimacy of private property boundaries insofar as both they and political boundaries share the “invisible” line property. What makes the former legitimate and the latter not, is that the latter’s existence relies solely on a fiat declaration of its own legitimacy (n.b. if a particular piece of private property was acquired through rent seeking and cronyism (e.g. eminent domain, subsidies, etc), it too is illegitimate). Declaration of political boundaries is akin to insisting that saying “I am the King” makes me King because my rights as King make it true.

The only principled position on borders and immigration is 100% open borders with no restrictions whatsoever. As long as one does not trespass on private property then no rights violation can occur. This is not to say, however, that such travellers have a right to assistance. There is no obligation upon others to provide newly arrived travellers with shelter, food or an education. However, conversely, the right to provide such assistance should not be infringed upon. Sending these children back or walling them up in detention centers runs contrary to the humanitarian imperative of every religious and spiritual ideology; it prevents those who take those teachings seriously, and who are able, to exercise their right to help those in whatever manner they so desire. To paraphrase Ronald Reagan, “Mr. Obama, tear down this wall” – by which “wall” = border + welfare state.

Tootsie Pop Justice

Amazon.com has been accused by the Federal Trade Commission of permitting unauthorized in-app purchases by children. The FTC has filed a lawsuit against Amazon in U.S. District Court on behalf of parents affected by the activity of their children. So, apparently we need the government to protect us from our own children. This case exudes a breathtakingly absurd lack of parental accountability. Equally bad is the sycophantic credulous reporting on this case by the state media Apparatchik (in this case USA Today). Their putatively neutral reporting is laced with subliminally opinionated phrases that imply Amazon duped parent into using their children as pawns in some grand scheme. For example, USA Today says Amazon “willingly allowed” kids to make purchases within apps. Notice the clever shift of responsibility here? This phrase implies it was Amazon’s responsibility, not the parents, to be the final arbiter of their children’s behavior. No, Amazon did not “allow” the purchases. The parents allowed the purchases when they handed their unlocked and credit card enabled device over to their child. This is no different than parents handing their child a wad of cash, pointing them in the direction of the toy store and then telling them to be frugal. Meanwhile the parent wanders off somewhere else and then becomes enraged at the toy store when they find out little Johnny spent all his money there.

But, even though it was not Amazon’s responsibility, they (as well as the other two players in this market, Apple and Google) implemented some basic gatekeeping controls to mitigate (yes mitigate, not 100% eliminate all possibility of) such undesirable purchases. They required the entry of the account’s password even on an already unlocked device (the presumption being the child did not know the password but was merely handed an unlocked device by the parent). But you know what? The problem persisted. Which means parents were telling their children the password so they could make some purchases. At this point even if one were to try and make an argument that the companies had some culpability, however tenuous, that argument is completely shattered at this point. If you give your child your password for desirable purchase A then you must know there is nothing stopping them from making undesirable purchase B other than yourself. This is the classic case of the programmer’s conundrum when dealing with user feedback: I want it to work this way, except when I don’t. Stated differently the parent says: I want my child to make purchases I approve of without pestering me for a password every two minutes, except when I don’t, then I want the device to magically know I don’t approve of the purchase.

But even here Amazon did not stop in trying to please the consumer. They responded to complaints and implemented requested controls to try to solve the problem (all without any threat of state action). They implemented dollar value thresholds that required password entry, then they removed the value threshold entirely but still allowed for a short time window where re-entry of the password was not required. This was to avoid the annoyance of trying to buy five things all at once and having to enter your password five times in a row. But of course the problem persisted. Why? Because parents had already given their child the password! Outcomes did not change because the root cause of the problem remained: the parents.

And so now the parents, not recognizing their own culpability, have enlisted the aid of the state to force Amazon (after having already done so to Apple ) to protect them from their own inability to parent. The real loser in this case however is everyone else who uses similar smart-devices. We will have to endure increasingly annoying draconian licks to get to the center of the digital Tootsie Pop.

Irony Day

There is no holiday more incongruous with its stated celebratory raison d’être than the 4th of July, otherwise known as Independence Day, but perhaps more appropriately Irony Day. It purports to celebrate the complementary combination of political and individual independence (aka freedom and liberty). That it takes place in a country that actively thwarts the former while ignoring, for utilitarian reasons mind you, the latter, is perhaps more sardonic than it is ironic.

Consider for a moment what the representatives of the nascent United States did in July 1776: they made a declaration of secession. That is, they formally declared their disassociation from a larger political entity. Such is the right of all individuals. But from the vantage point of the state they had committed the most unforgivable of sins: treason (the crime of betraying one’s country wherein “betray” is equivalent to “desiring to no longer be ruled by”). It is curious indeed that a universal feature of states is that no crime is considered more egregious than for one to undermine its authority by leaving it. In this regard the United States is no different than every other country; from the Civil War to various state secession movements the US has been quite consistent in operating contrary to its founding principals. This is the mantra of the hypocrite: do as I say, not as I did. The propaganda of inviolable political solidarity permeates our most holy, secular prayer to the state-as-god, the pledge of allegiance. With its appeal to profession of undying allegiance to the very idea of “one nation… indivisible” we are indoctrinated nearly from birth with childish appeals to Manifest Destiny. Consider the absurdity of that idea for a moment. If Maine joined Canada or Florida became an independent nation, do we truly believe the other 49 states somehow could no longer continue on? One is left to wonder how 200 odd countries get along without being part of our union. The fear of secession movements is predicated on one thing: money. It is no different than a mob boss acting out against a business that decides to “secede” from the mob’s extortion racket; there is little daylight between what the State and the Mob are willing to do to retain their power.

It is easier to erect a fence around sheep than to hunt down the wolf.

 

While the 4th of July is one part celebration of history, it is another part celebration of what we believe that historical event granted us: liberty. All people have a natural and instinctual love of liberty. No one relishes the idea of being subjugated and told what to do. So this begs the question: why do we with one hand pay lip service to notions of independence and with the other hand pull the voting lever for politicians who enact laws that restrict our independence? I call it The Cage Effect: only those at the edge are aware the cage exists. Laws affect other people (at the edge), not us (in the middle). We have allowed the political class to build this cage around us; we naively believe them when they promise to keep us safe. It is easier to erect a fence around sheep than to hunt down the wolf. But the web of laws, regulations, edicts and arbitrary enforcement serve not to protect us but to subjugate us into dependence. The entrepreneurs, free thinkers, and non-conformists who try to break free are routinely frustrated. They, and those who witness their trials, try to rouse those in the interior to fight back, but they prefer to remain blissfully ignorant or assure us it is for our own good. The mantra of the statist is that if anyone leaves the cage, all will suffer, therefore no one may ever leave.

As a state becomes more totalitarian, its cage shrinks. Eventually it becomes small enough that all are affected. On July 4, 1776 the cage was quite large. Today it is much smaller. Perhaps one day we shall break free. That day will truly be Independence Day.