Ezra Klein

Recap: An interview with the father of the individual mandate; an idea for Mitt Romney; and the two policy questions driving the legal battle over health-care reform.

Elsewhere:

1) Do deficits steal from our children?

2) Behavioral economics and the "culture of poverty."

3) Obama hasn't moved to "the center."

4) Kraft's 400,000-square-foot cheese cave.

Some of the legal questions related to the individual mandate are, at least partially, policy questions. In particular, what does the individual mandate do? And can the law stand without it?

The argument conservatives are making right now is that the individual mandate regulates "economic inactivity." That's not a description anyone had heard of it back when conservatives were co-sponsoring bills with the individual mandate, and it's not what the policy's creator had in mind when he developed it. But that doesn't make it untrue.

To believe it, however, you need to adopt a very narrow definition of what's being affected here: Namely, the decision to purchase or not purchase health-care insurance. The more traditional view is that the individual mandate is one of a slew of rules and regulations bringing order to something much broader: The American health-care system, which all of us participate in. That's the view of the 38 health economists and academics who signed this brief (pdf). "There is no such thing as 'inactivity' or non-participation in the health care market," they wrote. "As the District Court" -- which ruled for the Affordable Care Act -- "recognized, virtually all Americans will, at some time during their life, require health care, either because of illness, accident, or the wear and tear of age."

Because health services are so expensive, the costs are defrayed over many years. That's what insurance does. And because we are a humane society, we have rules and regulations in place to ensure that people can get treated even if they don't have insurance. In that way, you may not be interested in the health-care system, but if you get hit by a bus, the health-care system is interested in you -- and that's true even though you weren't making an economic choice to become "active" in the health-care system when you stepped into the street. You were, by virtue of our laws and regulations and taxes, already an active participant. The authors of the brief make this point -- and its connection to the individual mandate -- well:

The requirement to obtain a minimal level of health insurance is predicated on the unique characteristics of the health care market -- the unavoidable need for medical care; the unpredictability of such need; the high cost of care; the inability of providers to refuse to provide care in emergency situations; and the very significant cost-shifting that underlies the way medical care is paid for in this country. Those characteristics do not obtain in other markets and, without them, the predicate for the kind of regulation adopted in Section 1501 does not exist. Hence, affirming Congress’ power to adopt Section 1501 will not open the door to unfettered expansion of federal power over individual liberty, as Appellants fear.

To make this more concrete, when an uninsured person breaks a leg and needs hospital care, that care is paid for by the rest of us. It'd be a bit odd for your economic inactivity to cost me money. But your decision to remain without insurance does cost me money, because you're an active consumer of health-care risk and an active participant on a health-care market that affords you certain benefits. When you don't purchase insurance, you've not decided against participating in the American health-care system. You're just not participating responsibly. To quote Mitt Romney:

The Obama administration announced today that the 2012 Democratic Convention will be in Charlotte, North Carolina. This has been taken as evidence that the Obama administration is worried about North Carolina, confident in North Carolina, or otherwise focused on North Carolina in 2012. And that's how this always goes: The 2012 Republican Convention will be in Tampa, Florida, suggesting that Republicans would like to win Florida. The 2008 Democratic Convention was in Colorado, and that was taken as evidence that the Democrats wanted to win in the West.

In general, everyone wants to win everywhere. But convention placement does not help them in that quest. And nor, it turns out, do governors. A comprehensive analysis of presidential elections since 1930 found that "generally, parties do not derive significant electoral benefits in states selected to host the national convention or those in which they control the governorship."

I get a steady stream of e-mails asking that question. Apparently, there's a chain letter going around that says, among other things, "IF YOU SELL YOUR $400,000 HOME, THIS WILL BE A $15,200 TAX." Yes, the caps are in the original.

Anyway, no one is taxing the sale of your $400,000 home. FactCheck.org explains it all. The short version is that this is a tax on certain residence sales meeting certain conditions and involving people with very high incomes:

Only a tiny percentage of home sellers will pay the tax. First of all, only those with incomes over $200,000 a year ($250,000 for married couples filing jointly) will be subject to it. And even for those who have such high incomes, the tax still won’t apply to the first $250,000 on profits from the sale of a personal residence — or to the first $500,000 in the case of a married couple selling their home.

More here.

In 1991, economist Mark Pauly was the lead author of a Health Affairs paper attempting to persuade President George H.W. Bush and his administration to adopt a universal health-care proposal that would keep the government from eventually taking over the sector. "Our view is that excessive government intervention will make matters worse," wrote Pauly and his co-authors. "Our strategy, therefore, is to design a scheme that limits governmental rules and incentives to the extent necessary to achieve the objectives."

At the heart of that strategy was the individual mandate, which would go on to be promoted by congressional Republicans, the Heritage Foundation, and Massachusetts Gov. Mitt Romney before being adopted by Democrats and becoming a bete noire of conservatives. I spoke to Pauly earlier this afternoon, and an edited transcript of our conversation follows.

Tell me about your involvement in the development of the individual mandate.

I was involved in developing a plan for the George H.W. Bush administration. I wasn't a member of the administration, but part of a team of academics who believe the administration needed good proposals to look at. We did it because we were concerned about the specter of single payer insurance, which isn't market-oriented, and we didn't think was a good idea. One feature was the individual mandate. The purpose of it was to round up the stragglers who wouldn’t be brought in by subsidies. We weren’t focused on bringing in high risks, which is what they're focused on now. We published the plan in Health Affairs in 1991. The Heritage Foundation was working on something similar at the time.

What was the reaction like after you released it?

There was some interest from Republicans. I don’t recall whether they formally wrote a bill or just floated it as an idea [It did make it into a bill -- Ezra], but Democrats in Congress said it was "dead on arrival." So that was the end of my 15 minutes.

Was the constitutionality of the provision a question, either in your deliberations or after it was released?

I don’t remember that being raised at all. The way it was viewed by the Congressional Budget Office in 1994 was, effectively, as a tax. You either paid the tax and got insurance that way or went and got it another way. So I've been surprised at that argument. But I’m not an expert on the Constitution. My fix would be to simply say raise everyone’s taxes by what a health insurance policy would cost -- Congress definitely has the power to do that -- and then tell people that if they obtain insurance, they'll get a tax break of the same amount. So instead of a penalty, it’s a perfectly legal tax break. But this seems to me to angelic pinhead density arguments about whether it’s a payment to do something or not to do something.

That gets to one of the central questions in this argument, which is whether the individual mandate is a penalty for economic inactivity or whether it's part of a broader system of regulations affecting a market for health care that we're all participating in, whether we're buying insurance that day or not.

Life lessons from a New Yorker cartoonist:

Steve Benen runs the numbers and shows that the judges who have ruled against the Affordable Care Act (two of them) have gotten a lot more coverage than the judges who've ruled for the bill (also two of them). "In literally every instance, the Republican-friendly rulings generated more coverage, with better placement, and longer stories than the rulings preferred by Democrats," writes Benen. "If there's a sensible explanation for this, I'd love to hear it."

I actually think there is a sensible explanation for this: The two judges who ruled for the bill upheld the status quo. And they went first. So their rulings changed nothing. No one could accuse me of harboring an anti-ACA agenda, but I didn't give those rulings much coverage.

The two judges who ruled against the bill called for enormous changes to the status quo, and enormous changes to the status quo are almost the definition of what "news" is. These two rulings have genuinely called the bill's future into question, and that's a big story.

The test will come at the next level, when an appellate court rules on the legislation. Whether that goes for or against the administration, it should get a significant amount of coverage. Though, at this point, you could make a good argument that the law is so clearly going to end up before the Supreme Court that nothing between here and there really matters.

I think Ben Smith is right that if the fight over health-care reform moves from the Congress to the courts, Mitt Romney's viability in the Republican presidential primary improves dramatically:

During last year's debate, Romney struggled to distinguish the Massachusetts plan, which his spokesman called his "signature" accomplishment as governor -- with its exchange, mandates, and subsidies -- from a federal plan that shared its policy pedigree and had obviously been constructed along the same lines.

One of Romney's weak arguments was that the Massachusetts plan was fundamentally different, as a matter of policy, because it had been enacted on a state rather than federal level. The argument got little traction and Romney, after an effort in the Spring of 2010 to explain his record, simply fell silent.

Romney's argument is now much stronger. Because the main objection to ObamaCare, as its critics call it, is no longer a matter of policy nuance. Now critics primarily make the case that it's an unconstitutional expansion of specifically federal power. And on that turf, the similar structure of the plans doesn't matter. Romney enacted his at a state level, and states have -- conservatives argue -- more power to regulate the insurance industry, as they do with car insurance.

I've assumed that Republicans had essentially exhausted their options for universal health-care proposals at this point. After Bill Clinton adopted Richard Nixon's employer-focused plan, Republicans -- Romney included -- retreated to a plan based around an individual mandate. After Barack Obama adopted Romney's plan, Republicans retreated to ... nothing at all. They simply dropped the dream of universal coverage.

But in principle, universal coverage is enduringly popular. That's traditionally been true even among Republican voters (I'd love to see more recent polling on this question if anyone has it). And there's another category of plans that I hadn't considered: state-based proposals.

Over the years, various politicians have proposed federalist pathways to universal care. The federal government would set out some basic conditions -- X percentage of residents covered with insurance that's at least up to X standard -- and provide some funding, and states could go their own way. Ron Wyden and Scott Brown, in fact, have a proposal to turn the Affordable Care Act into that bill, at least for the states that want to take advantage of it.

With the Republican argument against the Affordable Care Act trending in a federalist direction, you could imagine some conservative politician who actually wanted to solve the coverage problem embracing something like this. Romney hasn't been known for his courage as a campaigner, but if he wanted to go on offense, he could develop a proposal along these lines and use it to both frame his effort in Massachusetts as a good thing -- after all, he did bring near-universal coverage to his state -- and create a policy platform that allows him to offer actual solutions to the nation's problems (an important part of any general election campaign) while maintaining a harsh critique of Washington. He wouldn't even need to change the banner he's using in his rallies, which you can see atop this post.

Photo credit: CC license from Raw Mustard.

In Wonkbook today, I linked to a couple of legal analyses of Judge Roger Vinson's decision, including one by Ilya Somin that explained Vinson's reasoning this way. "Vinson concedes that the individual mandate is 'necessary' under existing Supreme Court precedent, but argues that it isn’t 'proper' because the government’s logic amounts to giving Congress virtually unlimited power. I think this is exactly right." It's worth quoting Vinson himself on this point:

The defendants have asserted again and again that the individual mandate is absolutely “necessary” and “essential” for the Act to operate as it was intended by Congress. I accept that it is. Nevertheless, the individual mandate falls outside the boundary of Congress’ Commerce Clause authority and cannot be reconciled with a limited government of enumerated powers. By definition, it cannot be “proper.”

That thinking is the "weak link" in Vinson's case, writes Somin's co-blogger Orin Kerr. It's really not up to Vinson overturn existing Supreme Court precedent in favor of his personal interpretation of the intent of the Founders. Kerr continues:

Judge Vinson is just a District Court judge. And if you pair Justice Thomas’s dissent in Raich with Judge Vinson’s opinion today, you realize the problem: Judge Vinson is reasoning that existing law must be a particular way because he thinks it should be that way as a matter of first principles, not because the relevant Supreme Court doctrine actually points that way. Remember that in Raich, the fact that the majority opinion gave the federal government the power to “regulate virtually anything” was a reason for Justice Thomas to dissent. In Judge Vinson’s opinion, however, the fact that the government’s theory gave the federal government the power to “regulate virtually anything” was a reason it had to be inconsistent with precedent.

Obviously, I’m not arguing that Judge Vinson was bound by Justice Thomas’s dissent. Rather, my point is that Judge Vinson should not have used a first principle to trump existing Supreme Court caselaw when that principle may not be consistent with existing caselaw. Either Justice Thomas is wrong or Judge Vinson is wrong, and Judge Vinson was not making a persuasive legal argument when he followed the first principle instead of the cases. Because Judge Vinson is bound by Supreme Court precedent, I would think he should have applied the cases.

If you want to follow this argument a bit further, Simon Lazarus delves into more detail on the some of the past rulings and statements that Roberts, Kennedy and Scalia would have to wipe away to rule against the Obama administration in this case. The result, he says, would be not just a ruling against the legislation, but a ruling that would "exhume the long-dead and discredited doctrines that the pre-New Deal Supreme Court deployed to overturn laws that prohibited child labor, prescribed minimum wage levels and maximum hours."

My understanding is that many libertarians and conservatives would like to see the Supreme Court return to a limited understanding of the Commerce Clause closer to what prevailed in the past. But until now, the Supreme Court hasn't shown much interest in that project. In theory, they're more persuaded by the precedent they've signed their names to than to the first principles that Vinson invoked in his decision. But in practice, on this particular case, for this particular law? Who knows.

I'm a big fan of Dropbox, a service that easily allows you to store large amounts of data in a folder you -- or others you give the password to -- can access from any computer connected to the Internet. So I was interested to see Brad DeLong quote this Quora thread on why Dropbox succeeded where so many similar products failed. This answer contains a lot of wisdom, I think:

Well, let's take a step back and think about the sync problem and what the ideal solution for it would do:

There would be a folder.
You'd put your stuff in it.
It would sync.
They built that.

Why didn't anyone else build that? I have no idea.

"But," you may ask, "so much more you could do! What about task management, calendaring, customized dashboards, virtual white boarding. More than just folders and files!"

No, shut up. People don't use that crap. They just want a folder. A folder that syncs.

"But," you may say, "this is valuable data...certainly users will feel more comfortable tying their data to Windows Live, Apple Mobile Me, or a name they already know."

No, shut up. Not a single person on Earth wakes up in the morning worried about deriving more value from their Windows Live login. People already trust folders. And Dropbox looks just like a folder. One that syncs.

"But," you may say, "folders are so 1995. why not leverage the full power of the web? With HTML 5 you can drag and drop files, you can build intergalactic dashboards of stats showing how much storage you are using, you can publish your files as RSS feeds and tweets, and you can add your company logo!"

No, shut up. Most of the world doesn't sit in front of their browser all day. If they do, it is IE 6 at work that they are not allowed to upgrade. Browsers suck for these kinds of things. Their stuff is already in folders. They just want a folder. That syncs.

That is what it does.

If historians ever have to pinpoint the day that America lost the future, they're likely to look to last Thursday. That was when Majority Leader Harry Reid and Minority Leader Mitch McConnell took to the floor of the Senate to announce an agreement on fixing the increasingly sclerotic, polarized, dysfunctional body they lead. Their agreement? Neither of them would fix it. Both promised not to change the rules of using a majority vote for at least four years. Nor did they set up an alternative process for taking a good, long look at why the Senate has begun to make a Beverly Hills divorce look courteous and functional. They just . . . moved on.

This came a few days after President Obama's State of the Union address, in which he exhorted Americans to make the tough decisions necessary to "win the future." That would would mean overhauling, among other things, the public sector. "We can't win the future with a government of the past," he warned.

But when it came to offering specifics, the president whiffed. He settled for a laugh line about regulating salmon rather than a cold-eyed appraisal of the gridlock and misaligned incentives of the body that -- along with the House -- serves as the board of directors for the United States of America. How well they work matters much more than who regulates what we put on our bagels. As an explanation of what stands between America and "winning the future," Obama's speech wasn't good enough. He dodged the real problem.

Two weeks before Obama's address, however, Sen. John Kerry delivered the speech that Obama should have given. Like Obama, Kerry emphasized that "developed and developing countries are making far-reaching choices to reshape their economies and move forward in a new and very different global era." Like Obama, Kerry intoned that "we as a people face another Sputnik moment today." Like Obama, Kerry argued that "unprecedented levels of investment in science and technology, engineering and R&D" had provided the foundation for American leadership in the 20th century, and would be required to build on it in the 21st.

But Kerry's explanation of the way our political system is impeding our efforts to adapt to a fast-changing future and meet the obstacles in our path was much more ambitious, and much more precise. "On issue after issue," he said, "enduring consensus has been frayed or shredded by lust for power cloaked in partisan games." He noted that the individual mandate began as a Republican idea, that cap-and-trade was a favored policy of the first Bush administration, that treaties that were much more far-reaching than START once passed with 90 or 95 votes.

Wonkbook today has plenty of analysis -- both political and legal -- of Judge Vinson's ruling against the Affordable Care Act. The bottom line of much of it is that the fate of the legislation is now, as it was last week, in the hands of Anthony Kennedy.

That's likely to be true. But the fact that the Supreme Court will still have the ultimate word on this does not mean nothing changed yesterday. Vinson's ruling, which was much more extreme and sweeping than previous rulings, opened up the right side of the debate. So now there are two possible questions the Supreme Court must decide on. The first is the basic legitimacy of the legislation. Many Court-watchers expect that the question will be decided on a 5-4 split, with Kennedy proving the deciding vote. If five justices -- or more -- say the law is constitutional, their work is done. But if five or more say the individual mandate is not constitutional, then a second question emerges: Is the mandate severable, as Judge Hudson thought it was? If the Court says it is, then the vast bulk of the legislation remains intact, and the only real question is whether congressional Republicans are open to crafting some sort of replacement to the provision if it proves needed in 2015 or 2016 or 2017. If the Court says it's not, and voids the entirety of President Obama's most important legislative achievement, that's a decision with much more far-reaching consequences.

Most Court-watchers I've spoken to think it very unlikely that Vinson's ruling will stand. The bigger danger, they say, is that Vinson's ruling will make Hudson's ruling seem more modest and appealing. But there's a good chance that whatever the decision is, it will come in 2012, while Barack Obama is campaigning for president and his supporters are at their most activated. In that environment, an adverse ruling could radicalize liberals toward the Court in much the way that Roe radicalized conservatives. This case puts the Supreme Court more firmly at the center of a major and polarizing political issue than they've been in recent memory. The long-term consequences of an aggressive ruling in that context will also be weighing on Kennedy and his colleagues as they grope their way to a decision.

The Vinson Ruling

Florida district court judge Roger Vinson has ruled all of health care reform unconstitutional, report N.C. Aizenman and Amy Goldstein: "A federal judge in Florida on Monday became the first to strike down the entire law that overhauled the nation's health-care system, potentially complicating implementation of the statute in the 26 states that brought the suit...As the judge ruled in the Virginia case, Vinson held that Congress overstepped its authority by compelling nearly all Americans to be insured or pay a fine. But Vinson went further: Likening the law to 'a finely crafted watch' in which 'one essential piece is defective and must be removed,' he ruled that the insurance mandate cannot be separated from the rest of the statute and therefore the entire law must be voided."

Read the full ruling: http://scr.bi/eI6Oqg

Democrats' legislative sloppiness provided an opening for the decision, writes David Weigel: http://slate.me/eaUzjw

The rulings have been surprisingly political, writes Jonathan Cohn: "There’s what looks like a shout-out to the Tea Party--specifically, a reference to the American Colonists' outrage over the tax on tea. (Page 42.) There’s the gratuitous reference to General Motors as “partially government-owned.” (Page 45.) And there’s the use of President Obama’s campaign rhetoric against the law Obama now supports. (Page 68). Nor is the first time a judge invalidating the Affordable Care Act may have tipped his political hand. Henry Hudson, the federal judge who issued a narrower ruling against the law late last year, noted in his decision that the bill was rushed through the legislative process--which is a strange way to describe a law nearly fourteen months in gestation, unless you are trying to argue there was something fundamentally illegitimate about the process that produced it.

Vinson's argument that the individual mandate is non-severable derives from the administration's argument that the individual mandate is non-severable, writes Peter Suderman: "Vinson concludes that 'the individual mandate is indisputably necessary to the Act’s insurance market reforms, which are, in turn, indisputably necessary to the purpose of the Act.' Essentially, the administration's lawyers argued that the health care law wouldn’t work without the mandate, and Vinson took them at their word."

The decision relies on weak originalist arguments, writes Mark Hall: "The same Founders wrote a Constitution that allowed the federal government to take property from unwilling sellers and passive owners, when needed to construct highways, bridges and canals. But Judge Vinson dismissed those and other examples with the briefest of parenthetical asides: '(all of [these] are obviously distinguishable)' (p. 39). Instead, he twice cites and quotes the lower court opinion in Schechter Poultry (pp. 53, 55), which struck down the National Industrial Recovery Act, at the height of the Great Depression and the pinnacle of Lochner jurisprudence. Still, it’s fair enough to conclude, absent controlling precedent, that being uninsured might not constitute interstate commerce. What’s harder to swallow is the judge’s rejection of the Necessary and Proper Clause."

Vinson got it right, writes Ilya Somin: "As Vinson explains, both the 'economic decisions' argument and the 'health care is special' argument ultimately amount to giving Congress the power to mandate virtually anything, and therefore conflict with the text of the Constitution and Supreme Court precedent. I addressed both arguments in more detail here. Judge Vinson also notes that the scenarios he raises are not merely a 'parade of horribles,' but have a realistic basis, a point that I discussed in this recent post. Turning to the Necessary and Proper Clause, Judge Vinson concedes that the individual mandate is 'necessary' under existing Supreme Court precedent, but argues that it isn’t 'proper' because the government’s logic amounts to giving Congress virtually unlimited power. I think this is exactly right."

Vinson's argument ignores precedent, writes Orin Kerr: http://bit.ly/hfGLxa

The ruling violates opinions Justices Scalia, Roberts, and Kennedy have written, writes Simon Lazarus: "Today's decision in Florida federal district court striking down the Affordable Care Act in its entirety would effectively shred the Constitution as it has been interpreted, applied, and endorsed across a broad ideological spectrum for the last three-quarters of a century -- since the New Deal -- and, actually, dating back to Chief Justice John Marshall's expansive interpretations of the constitutional provisions directly at issue here...Among those who have joined in rejecting the century-old, long-defunct decisions on which Judge Roger Vinson's decision rests, are Justices Scalia, Kennedy, and Chief Justice Roberts. They will have to twist their prior decisions and statements into pretzels in order to rule the individual mandate or other ACA provisions unconstitutional."

The reaction to the decision shows you can't take the Constitution away from politics, writes Mark Tushnet: http://bit.ly/hnwsn7

The ruling on severability relies on evidence from the Family Research Council, an anti-gay hate group, writes Igor Volsky: "The most surprising part of Judge Roger Vinson’s ruling was his argument that the individual mandate was not severable from the health care law as a whole and must therefor bring down the entire Affordable Care Act...In fact, as Vinson himself admits in Footnote 27 (on pg. 65), he arrived at this conclusion by 'borrow[ing] heavily from one of the amicus briefs filed in the case for it quite cogently and effectively sets forth the applicable standard and governing analysis of severability (doc. 123).' That brief was filed by the Family Research Council, which has been branded as a hate group by the Southern Poverty Law Center (SPLC)."

Indie pop interlude: Papercuts' "Do What You Will".

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Still to come: The White House is pushing to increase investment in start-ups and small businesses; Senate Democrats are ready for a fight on the Constitutionality of health care reform; GOP governors are pushing for an end to teacher tenure; the administration wants to end billions in oil subsidies; and elderly elephants listen to Beethoven.

Recap: Reviewing "The Great Stagnation"; how to encourage pharmaceutical innovation; Ronald Reagan didn't make America conservative; and a judge ruled the Affordable Care Act unconstitutional.

Elsewhere:

1) It's true that the administration's legal arguments have undercut the argument that the individual mandate is severable from the ACA.

2) I think they're wrong, though. Remember that the Obama campaign's plan didn't have a mandate. That's worse policy, but it's not totally unworkable.

3) Fractal inequality.

4) I'll be talking individual mandate on The Last Word with Lawrence O'Donnell tonight.

That's the big question. On page 75, Judge Vinson says that he thinks his decision is sufficient to stop implementation of the Affordable Care Act in the 26 states named in this suit. If he's right, it's not just implementation that stops. It's current benefits.

That means the small businesses that are getting tax credits to buy their employees health-care insurance will stop getting those tax credits. It means young adults who went back on their parent's health-care plan after the law allowed kids up to age 26 to qualify as dependents might be kicked back off. It means the rebate checks being sent out to seniors in the Medicare donut hole will stop. It means insurance plans will no longer have to cover preventive care or be barred from rescinding coverage.

It means, in other words, disruptions in the market. In all likelihood, that'll either convince Judge Vinson or the Appeals Court above him to issue a stay on the decision so the law can go forward until some final resolution is reached. But perhaps not. My sense is the Obama administration did not expect a judge to try to strike down the whole of the law or impede its implementation. So they're scrambling right now.

The legal theory currently in vogue in conservative circles holds that the Constitution's vision of "a central government with limited power" -- to use Judge Vinson's phrase -- permits the government to establish a single-payer health-care system that every American pays into through payroll taxes and that wipes out the private insurance industry but forbids the government from administering a regulated market in which individuals purchase private insurance plans and pay a penalty if they can afford coverage but choose to delay buying it until they're sick.

There's a chance conservatives will come to seriously regret this stratagem. I think it's vanishingly unlikely that the Supreme Court will side with Judge Vinson and strike down the whole of the law. But in the event that it did somehow undermine the whole of the law and restore the status quo ex ante, Democrats would start organizing around a solution based off of Medicare, Medicaid, and the budget reconciliation process -- as that would sidestep both legal attacks and the supermajority requirement.

The resulting policy isn't too hard to imagine. Think something like opening Medicare to all Americans over age 45, raising Medicaid up to 300 percent of the poverty line, opening S-CHIP to all children, and paying for the necessary subsidies and spending with a surtax on the wealthy (which is how the House originally wanted to fund health-care reform). That won't get us quite to universal health care, but it'll get us pretty close. And it'll be a big step towards squeezing out private insurers, particularly if Medicaid and Medicare are given more power to control their costs.

Roger Vinson, the second Republican judge to rule on the constitutionality of the individual mandate, has, as expected, ruled against it. More surprising is that he's decided that the presence of the mandate means the rest of the law must be overturned, too, which is an extremely radical step. The full ruling has a very Bush v. Gore feeling, as Vinson concedes that his position is activist in the extreme and a break from the court's usual preference for limited rulings, but says, in effect, that he's going to do it just this once. "This conclusion is reached with full appreciation for the 'normal rule' that reviewing courts should ordinarily refrain from invalidating more than the unconstitutional part of a statute," Vinson writes, "but non-severability is required based on the unique facts of this case and the particular aspects of the Act. This is not a situation that is likely to be repeated." Italics mine.

That puts Vinson on the far right of this debate: Previously, Henry Hudson had ruled the individual mandate unconstitutional but the rest of the law constitutional, and Norman Moon and George Steeh had ruled both the mandate and the rest of the legislation constitutional. So there's currently a 2-2 split: The judges appointed by Democrats think the law constitutional, and the judges appointed by Republicans think the law varying degrees of unconstitutional. Whatever happens to the legislation at the end of the day, the clear level of politicization in the judiciary is getting its day in the sun. Vinison even shouts out to the Boston Tea Party in his decision.

Vinson's ruling does not halt, slow, or otherwise impede implementation of the act.* What it does do is speed the law's route to the Supreme Court, which is where this question will ultimately be decided. It could also have the effect of making the Supreme Court more comfortable with adopting Hudson's stance, under the theory that Vinson's ruling makes a limited rejection of the individual mandate seem less extreme. We'll see.

Update: I'm getting some contrasting opinions of whether the ruling could impede implementation. Vinson does not grant the plaintiff's request for injunctive relief, which would force the administration to stop implementing the law. But he says, on page 75, that he expects they won't implement the law given his ruling. it's not clear what force that has. I'll try to find out how the Justice Department is actually treating this and will report back.

Update the second: here's the DoJ's statement:

“The department intends to appeal this ruling to the Eleventh Circuit Court of Appeals.

“We strongly disagree with the court’s ruling today and continue to believe – as other federal courts have found – that the Affordable Care Act is constitutional. This is one of a number of cases pending before courts around the country, including several that the government has won in the district courts that are now before the courts of appeals. There is clear and well-established legal precedent that Congress acted within its constitutional authority in passing this law and we are confident that we will ultimately prevail on appeal.”

"We are analyzing this opinion to determine what steps, if any - including seeking a stay - are necessary while the appeal is pending to continue our progress toward ensuring that Americans do not lose out on the important protections this law provides, that the millions of children and adults who depend on Medicaid programs receive the care the law requires, and that the millions of seniors on Medicare receive the benefits they need."

As of yet, they're not specifically saying whether the ruling halts implementation.

One of the cost control experiments we've been attempting in recent years has been to increase the amount that individuals pay upfront for medical care in the hopes that this will lead them to make wiser and more judicious decisions when purchasing medical care. The problem, however, is that individuals don't always begin making wiser and more judicious decisions when faced with higher costs. Instead, they just buy less medical care. And as Atul Gawande reports, that can backfire:

The firm had already raised the employees’ insurance co-payments considerably, hoping to give employees a reason to think twice about unnecessary medical visits, tests, and procedures -- make them have some “skin in the game,” as they say. Indeed, almost every category of costly medical care went down: doctor visits, emergency-room and hospital visits, drug prescriptions. Yet employee health costs continued to rise -- climbing almost ten per cent each year. The company was baffled.

Gunn’s team took a look at the hot spots. The outliers, it turned out, were predominantly early retirees. Most had multiple chronic conditions -- in particular, coronary-artery disease, asthma, and complex mental illness. One had badly worsening heart disease and diabetes, and medical bills over two years in excess of eighty thousand dollars. The man, dealing with higher co-payments on a fixed income, had cut back to filling only half his medication prescriptions for his high cholesterol and diabetes. He made few doctor visits. He avoided the E.R.—until a heart attack necessitated emergency surgery and left him disabled with chronic heart failure.

The higher co-payments had backfired, Gunn said. While medical costs for most employees flattened out, those for early retirees jumped seventeen per cent. The sickest patients became much more expensive because they put off care and prevention until it was too late.

Controlling health-care costs is, in the end, about doing a better job managing the illnesses of the very sick. Policies or insurance arrangements that lead to less management of those illnesses are likely, in the long run, to backfire, or at least prove insufficient.

Conventional wisdom holds that Ronald Reagan ushered in a new, conservative moment in America. But what's the evidence for it? Brendan Nyhan quotes political scientist James Stimson, saying that if Reagan did anything, it was to quickly take advantage of an existing opportunity for conservatism and then simply survive electorally as that moment drained away -- a cycle that probably sounds familiar to the Obama administration and a lot of its supporters:

Conservatism peaked with the election of Ronald Reagan; it was not produced by him. The 1980s did see pretty fundamental change in Washington, but ... [t]he first 100 days or so of the Reagan administration produced it all. The spring of 1981 saw Reagan's tax cut, his one serious effort to limit domestic spending, and the buildup of defense. The rest of the Reagan years, and the 1980s generally, were a time of conservative retreat. ...

Millions of people, having moved away from supporting government spending in the late 1970s, were moving back in support in the 1980s. Those millions were barely perceptible in the survey numbers and hardly noticed in Washington. The percentages of those who thought that "too little" was being spent on education [previously 53% in 1980 and 56% in 1982] moved from 60 in 1983 to 64 in 1984, down to 60 in 1985, then 61 in 1986, 62 in 1987, 64 in 1988. And the opposite numbers advocating "too much" fell at the same time. Over the eight years of the Reagan administration the percentages moved from 53 to 10 (83% too little) to 64 to 4 (94%). On the environment, it was the same, moving from 48 to 17 (74%) in 1980 to 65 to 5 (93%) at the close of the administration.

I wouldn't say this is definitive evidence, but if you believe that Reagan substantially transformed American politics, what features of the state or trends in the economy do you consider the strongest evidence for your thesis?

"Bohemian Rhapsody" as you've never heard it before:

The key to all of Tyler Cowen's arguments in "The Great Stagnation" is that innovation -- or at least innovation that boosts the economy -- is slowing. The graph above is reproduced in his e-book, and it comes from work (pdf) done by Jonathan Huebner. It uses a subjective measure of innovation -- essentially, advances historians consider important -- and divides them by world population. According to this measure, Cowen is both right and wrong -- right that innovation is slowing, but wrong that it'll pick up again. Huebner thinks there are limits, and we're reaching them.

His measure is imperfect, and the argument is controversial. In particular, I'm not convinced that dividing by world population is a sensible thing to do. But plenty of smart people believe that innovation is slowing. Paul Krugman, for instance:

I live in a house with a late-50s-vintage kitchen, never remodelled. The nonself-defrosting refrigerator, and the gas range with its open pilot lights, are pretty depressing (anyone know a good contractor?) — but when all is said and done it is still a pretty functional kitchen. The 1957 owners didn’t have a microwave, and we have gone from black and white broadcasts of Sid Caesar to off-color humor on The Comedy Channel, but basically they lived pretty much the way we do.

Now turn the clock back another 39 years, to 1918 — and you are in a world in which a horse-drawn wagon delivered blocks of ice to your icebox, a world not only without TV but without mass media of any kind (regularly scheduled radio entertainment began only in 1920). And of course back in 1918 nearly half of Americans still lived on farms, most without electricity and many without running water. By any reasonable standard, the change in how America lived between 1918 and 1957 was immensely greater than the change between 1957 and the present.

I'm not very familiar with the literature on this topic. On a gut level, it feels wrong: Surely the age of the Internet can't be considered a desert for new ideas. But intuition isn't the same as evidence. So does anyone know this literature a little better?

It took $165,000 of exports to support a single job in 2008, according to a report by the Department of Commerce, compared with GDP per worker of only about $100,000 in that year.

Via the Economist.

Can someone sketch me out an even moderately plausible scenario in which a moderate Republican governor who broke with his party on civil unions and cap-and-trade and then joined the Obama administration wins both the GOP nomination and the presidential election in 2012?

I often complain that "innovation" is a fuzzy concept that's difficult to talk about in a concrete way. That gets less true, thankfully, when you zoom in on specific industries. Then it becomes easier to identify specific problems and specific policies that could help.

Take the pharmaceutical industry. We know that the discovery of new drugs has been slowing down. We don't really know why. Some people say it's because the easy profits from developing me-too drugs -- which eat up about 80 percent of the sector's R&D; budget -- are just too tempting, and real innovation is just too difficult. Others say it's because discovering new drugs has simply gotten a lot harder. What isn't in doubt is that we could do a better job aligning the incentives for innovation. Writing in Health Affairs, Arjun Jayadev and Joe Stiglitz have two suggestions that both make a lot of sense:

1. Governments should pay more for innovative drugs than standard ones. This is called "value-based insurance design," and it's a hot idea in health-policy circles. Instead of Medicare paying whatever Pfizer says its drugs are worth, Medicare would decide payments based on "the marginal clinical benefit of additional drugs." Under a system like this, Medicare would pay the full cost of a new drug that's a big improvement over what's out there, but only, say, 70 percent of a me-too drug. That'd make the market for truly innovative drugs a lot larger than the market for me-too drugs. In other words, the market would be tilted toward innovation.

2. Governments should pay the cost of clinical trials. Clinical trials are one of the most expensive parts of developing a drug, and pharmaceutical companies have to bear the whole cost. This presents a couple of problems: It's a conflict of interest, for one. It's a disincentive to try drugs that might not work out. It forces small companies with innovative cultures and products to sell themselves to larger companies who can front the cost of drug trials. It means the trial data, which could be of great help to other innovators and to medical researchers, are proprietary. Some form of public funding for trials could solve all these problems, and you could even bias it toward innovative drugs and away from me-too drugs.

I should note that there isn't really anything wrong with me-too drugs. Some of them are slight improvements on their predecessors, or work for different people in different ways. But if we want to encourage breakthrough innovations, the system should be set up to heavily advantage the innovators, rather than the companies that are trying to play it safe.

Photo credit: Francois Lenoir/Reuters.

Karl Smith disagrees with Tyler Cowen. The problem isn't with innovation, he says. It's with us:

To the extent we are throwing money at unproductive uses, is this a supply problem as Tyler posits or a demand problem, as I tend to think?

In other words is it that innovation has just become so darn hard or is it that higher salaries are luring all of our bright kids into becoming doctors and hedge fund managers, while relatively fewer are becoming engineers and teachers.

The net effect of my story is that there less human intellect devoted to productive innovation and that the typical American – by dearth of K12 education – is further from the technological frontier.

Tyler hints at a demand side solution when he says we need to raise the status of scientists, but my question is whether we have actually run out low hanging fruit or have simply stopped picking it?

I don't see this as particularly either/or. Perhaps we've organized ourselves away from innovation because innovating has become too hard, and the rewards have become too uncertain. Better to head to Wall Street and skim a bit off the top of the innovators. Or perhaps we've just made some bad organizational decisions. The solution is the same, either way: Make it more lucrative to join innovative professions than parasitic ones. But we don't do that. To give just one example, an engineer who comes up with an important product has his salary taxed as income. A hedge-fund manager who rides a bubble or gets cheap money to carry trade through a bust gets his income taxed at the much-lower capital gains rate. Getting rid of this distortion -- which would also improve the budget deficit -- is, so to speak, low-hanging policy fruit, and we've not picked it.

That's what card-carrying libertarian Will Wilkinson thinks:

Libertarian influence on Republican thinking about social policy often does hurt the poor. Libertarians are politically most constructive when offering “second-best” welfare-state alternatives to the status quo -- social security personal accounts, education voucher schemes, etc. -- and most destructive when pushing their ideas about “first-best” policy. One way to be a liberaltarian is to just forget about utopian libertarian “first-best” targets and promote “second-best” policies to the top spot. An analogy: hardcore socialists thought social democrats were selling out the revolution by offering half-measures, but it turned out that social democracy is just a hell of a lot better than full-on socialism in terms of liberty, equality, wealth, health, happiness … everything. But I digress.