The Locker Room

February 25, 2011

AG and HB 2 (NC Health Care Protection Act)

Posted by Daren Bakst at 2:59 PM

The legislature recently passed HB 2, which would exempt North Carolinians from some of the requirements of ObamaCare.

Attorney General Roy Cooper has just sent a letter and memo to Govenor Perdue arguing that the bill is unconstitutional and could threaten NC's Medicaid program.

Let's address the AG's arguments:

AG: HB 2 violates the Supremacy Clause

Comment: If courts deem a state statute to be in conflict with a constitutional federal law, then the federal statute would trump the state statute.

This doesn't mean that HB 2, in and of itself, is unconstitutional because a court may strike down the law.  The AG presumes that because Congress passed a law, states must do whatever Congress wants even if the federal law is unconstitutional.

The AG's own memo cites from the Supreme Court: "the federal judiciary is supreme in the exposition of the law of the Constitution.."  This is the principle of judicial review--the Supreme Court, not Congress has final say on what is constitutional.

Further, states can make decisions on compliance with federal laws.  They don't have to automatically do whatever Congress wants.
In fact, states regularly pass laws that are in direct conflict with federal laws, for numerous reasons.  A recent example is the REAL ID Act.  Numerous states passed laws refusing to comply with the REAL ID Act for cost reasons, which is a far cry from objecting to a law based on constitutional grounds. 

The North Carolina House, in 2008, passed a bill refusing to comply with the REAL ID Act.  There were 62 Democrats who voted in favor of the bill and only 3 that voted against it.  There were only 7 Republicans that voted for it, and 42 Republicans that voted against it.  Clearly, the idea of passing laws that are in conflict with a federal statute is not a partisan issue.

If the judiciary strikes down HB 2, then the law, of course, shouldn't remain in place.  However,  North Carolina doesn't have to preemptively strike down its own laws.

The AG memo argues "The State and its residents must comply with the ACA [ObamaCare] until and unless a court orders otherwise."  This is 100 percent wrong.  The state and its residents have every right to not comply until a court orders otherwise.*

AG:  HB 2 "could jeopardize federal funding of Medicaid in North Carolina."

Comment: Let's take the AG's argument step-by-step.

ObamaCare requires states to collect a $500 fee from health care providers to help fight fraud and abuse in Medicaid.

HB 2 "provides that no law or rule may impose a fee on a person for 'contracting with...a care system.'"

The AG's conclusion is therefore North Carolina would be avoiding its compliance requirements under Medicaid because HB 2 wouldn't allow the collection of the $500 fee.

Here's the problem with this argument: The $500 fee is being collected to fight fraud and abuse.  It is not a fee imposed on a person for contracting with a public health care system. 

In other words, the clear language and intent of HB 2 are addressing fees that punish people for the purpose of "contracting with, or enrolling in, or failing to contract with or enroll in, a public or private health care system or health insurance plan."

A fee to combat fraud and abuse is completely unrelated to such a purpose.

That's it for now.  My book on the subject will come out soon.

*State legislatures shouldn't just pass laws knowing they are likely to be unconstitutional--but that problem doesn't exist here.  Regardless of one's views on the legality of ObamaCare, there clearly is a real chance it will be struck down--thus making HB 2 constitutional.

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Rally, counter-rally planned at State Capitol in connection with progressives' national Save the American Dream event

Posted by Mitch Kokai at 2:45 PM

You might have heard that various progressive groups plan to rally outside the State Capitol at noon tomorrow. The event is linked to similar rallies planned in state capitals across the country.

Conservative counter-protesters will be out as well in Raleigh, and they're spreading the word to those who would like to join them.

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Union influence still strong in states with no collective bargaining

Posted by Dr. Terry Stoops at 1:55 PM

RiShawn Biddle's article in The American Spectator does not mention North Carolina, but it is still pretty instructive. Just substitute "North Carolina" for "Alabama" in the passage below, and it would still be pretty accurate.

One would think that Alabama, a state in which teachers unions don't have the power to force school districts into collective bargaining, would be a bastion of school reform. But within the past year or so, the National Education Association's Cotton State affiliate has shown there's more to wielding influence than sitting at negotiating tables.
Even without collective bargaining, the North Carolina Association of Educators have been wielding influence for decades.

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How do North Carolina colleges do on general education requirements?

Posted by George Leef at 12:25 AM

That is the subject of today's Pope Center piece by Jenna Robinson. Alas, most of the schools don't do a good job of ensuring students a broad education.

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The impact of the welfare state

Posted by Mitch Kokai at 11:07 AM

As the John Locke Foundation prepares to hear remarks from George Will at its 21st anniversary dinner, it's interesting to review Will's last address to a JLF crowd.

Circumstances were different in January 2008. Ten months before the presidential election, Will predicted accurately that Democrats would nominate Barack Obama and that Republicans would suffer from a "tsunami."

Beyond the political prognostication, Will offered some valuable insight about the future of the American welfare state:

Changing American attitudes are creating new challenges for the welfare state, Will said. “An assumption that Americans have shared for two centuries is now in doubt,” he said. “The assumption has been that the very process that produces increased wealth would also produce increased family and individual security. Today more and more Americans believe that the very process — a dynamic market economy — that produces increased wealth subverts individual and family security.”

“This matters because we have made a bargain: We have decided we want a welfare state,” Will said. “That’s not an open question in America any more. But having made that choice we have to make a second choice. We have to have a rapid rate of economic growth that will throw off revenue to pay the bill. In order to have that rapid rate of economic growth, we have to have low taxation and light regulations.”

While the welfare state requires the rapid economic growth of a market economy, it also “breeds a flinching from the insecurities and the uncertainties” of a market-based society, Will said. That means some people demand government security against the dynamic economy the welfare state requires.

Will's words came to mind as I finished Per Bylund's essay in the new book Back On The Road To Serfdom. Bylund, a Swede, describes how the welfare-state mentality has infected his native land:

[T]he kind of society that constitutes the Swedish model is unsustainable because of its inherent contradictions; it will eventually crash under its own weight. The welfare state, it must be pointed out, is dependent on people nut using the benefits it makes available to a more than minimal extent. As the system of benefits is expanded, people are expected to not do what they have an incentive to do. Instead, people are supposed to have an impeccable work ethic while being taxed to ridiculous degrees; only then is a welfare state at all possible.

But as we have seen in Sweden's case, the welfare state erodes the very ethic on which it depends for success. The fact is that the welfare state not only is economically unsustainable but also changes the mind-set of the people it supposedly serves: their incentives are altered, as people are gradually made better off by not working. Tampering with incentive structures eventually has a devastating effect on the economy.

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NCCAT and highly compensated employees

Posted by David N. Bass at 10:39 AM


A worthy question is why the head of NCCAT is the highest paid DPI employee in the state — and that by a fairly significant chunk.

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New CJO exclusive: This week's legislative recap

Posted by Mitch Kokai at 10:10 AM

David Bass' latest Carolina Journal Online exclusive reviews this week's activity for the N.C. General Assembly.

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Sheldon Richman on the fight in Wisconsin

Posted by George Leef at 10:07 AM

In his Friday column Sheldon Richman does an excellent job of explaining what is at stake in Wisconsin, and what isn't.

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John Legend can always give it away

Posted by Joseph Coletti at 09:29 AM

Why is the idea of voluntary action so hard for some people to grasp?

John Legend, like Bill Clinton before him, claims he did not want a tax cut.

"People fought to give me — a millionaire — a tax cut this year," he said. "I didn't need it. And all the other millionaires didn't need it either."

Legend, according to the AP article, is worried that community arts programs will be cut in the federal budget and unavailable to the next generation. Legend has used his own time and money to directly support these organizations. Why didn't he donate to the government instead? Probably because, like Warren Buffett, he thinks the private charity will do a better job. And he's right.

But if the Grammy winning artist really thinks the government needs his money more than he does, nobody needs to take it from him; he can give it back.

Almost nobody ever does.

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This writer sees things with perfect clarity

Posted by George Leef at 09:18 AM

Today's Wall Street Journal includes a letter from a writer who sees the issue in Wisconsin (and throughout the nation) with perfect clarity. We are witnessing a clash between those who have become accustomed to living very well at the expense of other people and think they are entitled to continue doing so, and those who don't want to keep paying. As I have often said, Marx was not mistaken in positing class warfare, but just got the classes wrong. The conflict has always been between tax consumers and tax payers.

The letter:

In "What's at Stake in Wisconsin's Budget Battle" (Cross Country, Feb. 19), John Fund raises the issue of who's in charge of our political system, voters or government unions? The answer is simple: government unions. This pattern must change, and the first leg of that change must be in Madison, the father of union giveaways. It is important for Gov. Walker not to succumb to union pressure, and it is equally as important for President Obama not to interfere in matters outside his domain.

I am reminded of French political economist and classical theorist Frederic Bastiat, who said, "When plunder becomes a way of life for a group of men living together in society, they create for themselves in the course of time a legal system that authorizes it and a moral code that justifies it." It seems that Monsieur Bastiat had our politicians in mind.

Elio Valenti

Brooklyn, N.Y.

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Top 10 salaries: NC Department of Public Instruction

Posted by Dr. Terry Stoops at 08:41 AM

Mary McDuffie
NCCAT Executive Director

Rebecca Garland
Associate State School Superintendent

Peter Asmar
Information Technology Executive

Phillip Price
Associate State School Superintendent

Julia Kron
NCTA Executive Director

Angela Quick
Associate State School Superintendent

Pat Ashley
District and School Transformation Director

Lou Fabrizio
Education Program Director III

Adam Levinson
Director, Race to the Top

June Atkinson
Superintendent Department Of Public Instruction

Source: News & Observer database. Salaries are current as of February 10, 2011.

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Merit Pay in Name Only

Posted by George Leef at 08:21 AM

The imbroglio in Wisconsin is focusing attention on the issue of educational quality, with the defenders of the status quo trying to get people to believe that a unionized teaching corps is more effective than one that is not unionized.

One aspect of that debate is whether teachers should receive merit pay. The unions will tell you that they aren't against the idea. But as Jay Greene observes in this piece what they have in mind is a system that automatically rewards teachers for the accumulation of additional credentials. We're supposed to assume that a teacher who has a master's degree in education is more effective than one who doesn't and therefore deserves more money. There is no such connection. All this approach does is to ensure jobs for more professors of education.

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Because central planning has worked so well

Posted by Mitch Kokai at 07:17 AM

Fed critics will perform a Jon Sanders facepalm when they read in Bloomberg Businessweek about the central bank’s nearly year-old Large Institution Supervision Coordinating Committee:

Before LISCC's creation, the Fed's 12 reserve banks handled much of the day-to-day supervision of big banks and reported back to the Board of Governors in Washington, which sets the rules for bank holding companies. With LISCC, the Fed can tap its deep bench of more than 200 PhDs to figure out how a particular risk might affect the entire financial system or just a single bank.

The intense scrutiny of everything from compensation to stock buybacks shows the depth of the regulatory incursion into tasks normally handled by bank directors. E-mails revealed by the Financial Crisis Inquiry Commission showed the Fed even considered ousting Lehman Brothers Chief Executive Officer Richard Fuld and exercising "influence" over his successor. It's too much, says Wayne Abernathy, executive vice-president of the American Bankers Assn. and former staff director of the Senate Banking Committee under former Senator Phil Gramm (R-Tex.). "What do these guys really bring to the table that the leaders of businesses don't already know or have?" he says. "The answer is: the wrong set of incentives. Their incentive is to take no risk."

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And he’s our job-creation guru?

Posted by Mitch Kokai at 07:15 AM

President Obama chose General Electric’s Jeffrey Immelt last month to lead the Council on Jobs and Competitiveness.

So Fortune asks an obvious question: How has Immelt performed in 10 years at the helm of GE?

Plenty have called for his head. A "disaster" is the description used by MarketWatch columnist Brett Arends, Seeking Alpha columnist Steven Towns, and many stock market bloggers. But no major shareholder has attacked Immelt publicly. No proxy advisory firm has told clients to vote against him as a director. The board is officially mum, but people close to the directors say he still has their confidence. Director A.G. Lafley, Procter & Gamble's former CEO, is showing his support in the sincerest way: SEC filings show that in January he bought 25,000 shares of GE. Still, Immelt's record isn't one that anybody, not even this board, would want. When he got the job on Sept. 7, 2001, GE stock was $40 a share. Almost 10 years later, it's around $20. The company's credit rating was AAA, the best, awarded to only a handful of enterprises; no more. It was the most valuable company on earth, commanding the highest market capitalization. Today it's about No. 8 (its rank varies day by day), just behind Royal Dutch Shell.

But what’s more important for a CEO: Leading a company successfully, or pursuing an agenda featuring “overlapping interests” with the president?

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Think we need tax reform?

Posted by Mitch Kokai at 07:14 AM

So does Roy Cordato. And so does Craig Matters, managing editor of Money magazine, whose latest editor’s note shares the following information from the Internal Revenue Service’s in-house “national taxpayer advocate”:

  • Over the past 10 years there have 4,428 changes to the tax code — which averages out to more than one a day.

  • The code is so complex that nine out of 10 Americans have someone do their taxes for them or rely on tax software.

  • The code’s complexity often leads honest Joes to make costly errors, while sophisticated taxpayers find loopholes to exploit.

  • And my favorite: The code is so long that no one is certain exactly how long it is.

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This weekend on Carolina Journal Radio

Posted by Mitch Kokai at 07:13 AM

Gov. Beverly Perdue has taken some hits in the media recently, one related to the felony indictment of a campaign donor and the other linked to a federal investigation of an auto wreck from Perdue’s days as a state senator. Rick Henderson explores the significance of these controversies in the next edition of Carolina Journal Radio.

Michael Sanera pans proposals for both commuter rail and high-speed rail in North Carolina, and you’ll hear both Dallas Woodhouse of Americans for Prosperity and state House Majority Leader Paul Stam, R-Wake, discuss school choice measures lawmakers could consider this year.

We’ll share highlights from a recent legislative debate about exempting North Carolinians from ObamaCare’s individual health insurance mandate, and Troy University economist Scott Beaulier will discuss the institutions that help promote economic freedom.

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New Carolina Journal Online features

Posted by Mitch Kokai at 07:04 AM

This week's Carolina Journal Online Friday interview features a conversation with Raleigh finance executive Garland Tucker about his book The High Tide of American Conservatism

Terry Stoops' guest Daily Journal urges state lawmakers to repeal and replace four high school end-of-course tests targeted for elimination in House Bill 48.

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