Monday, June 29, 2015

Some observations on King v. Burwell

My friends at the Journal Sentinel editorial board like the Supreme Court's decision in King v. Burwell. Fair enough. My take is different. But they get some things about it wrong. Let me offer the following friendly correctives.

First, they say that they always regarded the challenge to the availability of subsidies in federal exchanges to be frivolous. They are entitled to that view, although how non-lawyers presume to know that is beyond me. The frequency with which lay people dismiss legal positions as frivolous is one of my pet peeves. To call a claim "frivolous" is not to say that you think its wrong or even unlikely to prevail. It is to say that no lawyer could make a reasonable argument for it. The claim in King v. Burwell was not even close to frivolous.

But don't take my word for it.  Here's who also didn't think it was frivolous. Every member of the United States Supreme Court. Obviously three Justices thought it meritorious. But writing for himself and the other five, Chief Justice Roberts said that "[p]etioners' arguments about the plain meaning of Section 36B are strong." Sorry, guys, "strong" is not the same as frivolous.

Second, they say that Chief Justice Roberts, reading the statute in context, found the answer to be "clear." No, he did not. In fact, that is precisely what he did not find. He went to great lengths - did "somersaults" and interpretive "jiggery-pokery"* in Justice Scalia's colorful terms - to find that the statute was not clear. It was ambiguous. That's important . Unless he could say that it was ambiguous, he would have no choice but to apply it as written.

Third, Chief Justice Roberts made no finding about legislative intent - at least not in the way that courts typically do. He did not scour the legislative history and learn that "Congress" had expressed an unrealized intent to have the subsidies available in federal exchanges. He couldn't. The legislative history is almost completely silent on this question.

Fourth, whatever Congress did, it was not, as the board puts it, a "clerical error." Any minimally competent lawyer who read this language would know immediately that it limited subsidies to state exchanges. In fact, if that what's you wanted to do, this is precisely how you'd go about it. This was no typo. (If, in fact, Congress did intend subsidies to be paid in the federal exchanges, it should frighten us all that none of the expensive lawyers who populate the District of Columbia caught this.)

Finally, the Board kicks dirt at the idea that courts ought to apply legal language "literally" as if statutory construction was best seen as a jazz riff. You might as well criticize your doctor for "literally" applying what she learned in medical school. Reading statutory language to do what you think will make a law work better (and, therefore, must be what Congress "really"meant) necessarily requires that you form your own judgment about what the law is supposed to do and how that should be done. But that will almost never be obvious. Even in King, the Court had to decide that Congress was not limiting subsidies to state exchanges in order to provide states with an incentive to create them. It had to decide that the possibility that the absence of subsidies would lead to adverse selection in federal exchanges such that Congress simply could not have meant what it seemed to say. Whether you think they got it right or not, these are legislative - not judicial - judgments.

The one thing about "formalistic" and "literal" applications of the law is that they prevent judges from doing whatever they want.  They respect the separation of powers. I don't think any particular law - no matter how much we may like it - is worth abandoning these foundational elements of our constitutional structure. If the ACA needed saving, it was a job for Congress and not the Supreme Court.

Cross posted at Purple Wisconsin

Tuesday, June 23, 2015

The real tragedy of hatred

Whenever there is one of these awful mass shootings, someone somewhere will blame some aspect of "society" for what happened. A collective "we" are said to share the blame and the actions of a mad man and whatever demons possessed him must be understood in the "context" of some social evil. There is usually a political slant. "Privileged" people don't value less privileged people. "Elites" encourage nihilism and resentment toward society.

President Obama went so far as to indict America for the Charleston shootings, falsely claiming that these shooting "don't happen" in other developed countries. This will come as a surprise to the people at Charlie Hebdo in Paris, the AUF summer camp inTyrifjorden, Norway, the Tasso da Silveira Municipal School in Rio or the Dunblane Primary School in Scotland. It would have been accurate to say that mass shootings are more frequent in the United States but adding even that level of nuance would have stepped on his preferred narrative.

Of course, we can all play this game and find the villain we want, serving whatever hash tag philosophy we prefer. We can use the Charleston shootings to denounce white racism and public insensitivity to questions of "privilege." When two black teenagers set a kid on fire in Kansas City for being a "white boy" or a couple of cops in New York are executed as "revenge" for Eric Garner,  we can blame black racism and pundits who play "the race card."

If I want to rail against environmental extremism, I've got the Unabomber and Earth Liberation Front. If I want to smear folks who don't like the federal government, I can invoke Timothy McVeigh. If I think Islam is a problem, I invoke the Fort Hood shootings. If I'm worried about anti-Muslim bias, I can point to the Sikh Temple shootings. Anti-gay animus? Matthew Shepherd. Gay hostility against Christians? The shootings at the Family Research Council.

Even if a shooting was demonstrably not motivated by whatever or whomever we want to blame, folks will do it anyway. The "Tea Party" was blamed for the shooting of Gabby Giffords even though the shooter turned out not to be a political conservative. Even fifty years after the fact, supposedly responsible writers blame "the right" for the assassination of John F. Kennedy even though Oswald was a Marxist who targeted Kennedy for his anti-communism.

Sometimes violence is a manifestation of an organized political movement and it makes sense to treat it as such. But more often - at least in this country - lunacy precedes whatever rationale the lunatic chooses, The Charleston shooter rooted his insanity in racial animus but this tells us little about the state of race relations or what, beyond denouncing his vile delusions, to do about them. The confederate battle flag, for example, should not be flown in any context that implies official approval of the confederate cause which is inextricably intertwined with slavery. But the flag did not make him do it. Take it down, by all means, but removal of the flag will not make future violence less likely.

Some of this rush to politicize the actions of crazy persons is shameful opportunism, but not all of it. Events like the Charleston shootings are inexplicably evil. The notion that they may be random and unpredictable and beyond our control is frightening. We want to believe that we can order the world to prevent them. We want to believe that we can alter humanity's attitudes or relationships in a way that will assure that no human will do things like this. In a sense, when we believe that the wrong politics are to blame for unfathomable crimes and that new attitudes or social arrangements will prevent them, we are like Job crying out to a different type of God.

But Job got no answer and I'm afraid that we won't either. The problem is not in our politics, it's in ourselves - not as products of bad ideologies but as broken individuals.

Cross posted at Purple Wisconsin

Thursday, June 11, 2015

The Bucks and the billionaires

I think that there are very respectable arguments against public support for a new arena. But one that is not respectable goes like this: The guys who own the Bucks are billionaires. They can afford to pay for an arena.

Over at Right Wisconsin, I explain why. The point is not whether Marc Lasry and Wes Edens could pay for a new arena. It's whether it is in their interest to do so. Few people, even billionaires, give money away simply because they can. If Milwaukee wants someone to buy the Bucks and keep them here, it may need to pay them because it is asking them to do something that is not profit maximizing. The team would be worth more in Seattle. It is a fair criticism to say that we ought not give money to billionaires. But we've got to acknowledge that, in asking some billionaire to keep the Bucks in Milwaukee, we are asking him to give something to us.

But it turns out to be that it is very likely that Edens and Lasry should be willing to contribute something to the arena. You can thank Herb Kohl for that.

Descriptions of of the sale of the Bucks form Kohl to Edens and Lasry gives the NBA the right to buy the Bucks for $ 575 million should the arena not be built by 2017. In technical terms, the current owners do not have a "put" (the right to make the NBA buy the team), the league has a "call" (the right to make Edens and Lasry sell it.) The distinction is critical.

Edens and Lasry bought the team for $ 550 million. It may well be worth more than that today. Shortly after the Bucks were sold, the Los Angeles Clippers sold for $ 2 billion. The NBA has a very lucrative TV deal and, while the Bucks in Milwaukee are not going to be worth what a team in Los Angeles is worth, they may are almost certainly worth more than what they sold for. In a larger market (say Seattle), they would be worth a lot more.

But Edens and Lasry can't just move the team to Seattle. As Dan O'Donnell points out, if Milwaukee refuses to build an arena, the NBA will make them sell the team to the league. The league will then auction it off to the highest bidder. The profit (save $ 25 million) will be enjoyed by the NBA and the other 29 owners - not Edens and Lasry. If this is so, then Edens and Lasry need the arena deal to get done. They should be willing to pay something to make that happen - not because they "can afford it" but because it is in their interest.

But they won't necessarily be willing to pay for the entire cost of the building and perhaps not more than they have already agreed to pay. It all depends on what the team is worth - in Milwaukee. That is also critical. Unless the people negotiating this deal for the state are incompetent, the final arena deal will be structured in a way that ensures that the team remains in Milwaukee for a long time. The Milwaukee Bucks may be worth more than $ 550 - or even 575 - million, they will not be worth what the Seattle Bucks would be worth.

Let's try an example. Forbes estimates that the Bucks are worth $ 600 million in Milwaukee, but that's not necessarily all they would sell for -  even if they must remain in place. Forbes says, for example, that the Clippers are worth $ 1.6 billion. Yet that franchise sold for $ 2 billion. If you assume that the Bucks could be sold for a comparable 25% premium over Forbes evaluation, they might fetch $ 750 million. If that's so, then Edens and Lasry's $ 150 million is close to the top of the range of what  we can expect them to contribute.

I don't pretend to know what the team is worth or what the owners should be willing to pay. I make only two points. First, if they believe that the team is worth more than they paid for it, they should be willing to contribute something for the arena because they may lose that added value if it is not built. Second, because they must keep the team in Milwaukee if the arena is built, what they will be willing to contribute is going to be less than what it would be if they were free to do whatever they wanted with the team.

Cross posted at Purple Wisconsin

Tuesday, June 02, 2015

Political Tourette's, part I

Sometimes it seems that politicians speak to make noise.  To be sure, it is strategic bloviation. They string together of buzz words - lots of adjectives and emphatic ipse dixits - designed to evoke a mood, but nothing resembling an argument.  As one of the characters in HBO's VEEP observed, it's all "noise-shaped air."

One of the worst offenders is Rep. Sondy Pope (D-Cross Plains). Recently, she put out an incomprehensible press release accusing School Choice Wisconsin President of "misrepresentation" of the demand for the choice program. SCW had put out a press release noting that the there by had been an increase in applications for the state wide Parental Choice Program. The problem, according to Rep. Pope, is that some of the applicants for 2015-2016 were in the program in 2014-2015 and should therefore be excluded from  the number of applicants in the latter year.

That is, of course, gibberish. These students "demanded" the program in 2014-2015 and continued to "demand" it in 2015-2016 by applying to remain in it. One does not calculate the level of demand for a given good or service by excluding those who demanded it in the past. If I want to know what the level of donations to the Wisconsin Institute for Law & Liberty were in 2014, I don't exclude those who renewed donations that they made in 2013.

But I really wanted to focus on Rep. Pope's response to a memo by the Legislative Fiscal Bureau that calculated how much state aid would fund an expanded statewide voucher program if a given number of students enrolled in the program over the next ten years. The memo is of limited value. No one knows how many students will enroll in the voucher program. No one knows what other factors will be influencing the level of state aid over that period. And, of course, it makes no sense to discuss funding that has been "shifted" from public schools without considering the cost savings associated with students who those schools will no longer be educating. Whether the public schools will be better or worse off by allowing funding to follow the student is an empirical question.

But that's a subject for another day. In response to the LFB memo, Rep. Pope said that the point of choice expansion was to "reward the out-of-state interests that give millions to Republican campaigns …" This is a common meme of school choice opponents. They think that someone is out there profiting from the program.

I have yet to figure out who that is. The overwhelming number of schools accepting voucher students in Milwaukee are religious schools. Are the Archdiocese of Milwaukee or the Lutheran Missouri Synod (well, it does have Missouri in its name) "out-of state interests that give millions to Republican campaigns …." In these schools, the administrators and teachers generally make less money than those in public schools. If they are "profiteering," they seem to be making a hash of it. (While there have certainly been school operators who have misused voucher funds, public school employees have been known to do the same thing.)

In fairness, Rep. Pope - or whoever writes her press releases - is not the only one who seems to have some kind of phrase generation software that produces these word salads. I suppose that there is some perceived need to emote in response to something that you don't like.

Cross posted at Purple Wisconsin.

Monday, June 01, 2015

Why takeovers happen

My colleague CJ Szafir has an op-ed in Saturday's Milwaukee Journal Sentinel on the proposed Opportunity Schools Partnership Program. The OSPP would, among other things, allow the Milwaukee County Executive to appoint a Commissioner who could run selected failing public schools in the City of Milwaukee. It is comparable to "opportunity" or "recovery" school districts that have been established around the country with some success.

Of course, as CJ points out, the proposal has been attacked as "racist" because … well, just because. It is apparently an act of bigotry to care about poor black kids attending failing schools.  The OSPP might not work, but MPS has had twenty five years of increased funding and has failed to turn these schools around. Trying something new can't hurt.

Against this, opponents of the proposal argue that it takes away "the democratic rights" of citizens of Milwaukee. They would still vote for the Milwaukee School Board. But a limited number of schools within Milwaukee would, at least for a time, no longer be run by the School Board. City voters also vote for the County Executive - so there would still be political accountability for operation of the OSPP. The County Executive is "local" but less "local" than a school board elected by only city voters.

That is a cost. But removing those schools from the control of the Board is not a bug in the proposal; it's a feature. School board elections tend to be dominated by persons with a special financial stake in the schools, most notably the teachers' unions. This is particularly so in Milwaukee where, until recently, all teachers were required to live in the city. This has a tendency to privilege the status quo and the parochial interests of those who work in the schools rather than those who learn in them. One of the ideas behind the OSPP is to move around this roadblock to reform.

Local control of schools is traditional and valuable, although over the years it has steadily eroded, often at the behest of the "progressives" who now lament its qualification by the proposed OSPP. But if it's broke, you've got to fix it.

Cross posted at Purple Wisconsin

Sunday, May 31, 2015

Has satire become impossible, part I

Here's a teachable moment.

Advocates of school choice - and my colleagues and I are in the inner circle so I know of whence I speak - don't wish to defend bad apples in the program. We don't rally outside lousy private schools and seek to "save them." We regard them as embarrassments and believe that they ought to be held accountable. There is a debate about how that should happen. Some of us favor removal of poor schools from eligibility to participate in the program. Others believe that parents - aided by accurate and meaningful information - should be the ones to decide whether or not to send their children to a particular school. But nobody thinks it's just fine to have schools that don't help kids enrolling voucher students.

So Jim Bender, the President of School Choice Wisconsin, does not call me and suggest we lock arms outside of, say, Ceria M. Travis Academy, an embattled school participating in the Milwaukee Parental Choice Program. But "advocates" of public education - in this case, the Milwaukee teachers union - have done what amounts to the same thing. They rallied around Auer Avenue School calling for it to be "saved" from takeover by the proposed Opportunity Schools Partnership Program.

Absolutely none of the students at Auer are proficient in reading. Not a single one.

The union rallied to "save" Auer because the reorganization of the school under the proposed Opportunity Schools Partnership Program would preclude a role for MTEA. The major obstacle to public education reform is this form of regulatory capture - the assertion of political power by those who run the system and benefit from the status quo. For them, it's may be about the kids, but never at the expense of the employees. You can't be effective that way.

And, yet, it is choice advocates are accused of pandering to "special interests" and "profiteers." The irony is palpable. The inability of people who ought to know better to see that is stunning.

Cross posted at Purple Wisconsin.

Sunday, May 24, 2015

Fear and the prevailing wage

Over at Right Wisconsin, I have a column on the failure of some Republicans to support repeal of Wisconsin's prevailing wage law. My organization released a report this week that says school districts could have saved  between $ 163.2 and 244.8 million over the last five years had school bonding projects been conducted under market wages instead of the so-called "prevailing wage." In an environment in which reductions in state aid to schools are regarded by many as existential or even akin to "rape," one would think that not paying more for public works than we have to would be one of those things that we can all agree on. Even if we don't want to return that money to taxpayers, you'd think that we could agree that it would be better to spend the money on schools or the University of Wisconsin.

But we can't agree. I understand why Democrats oppose reform. Part of it is realpolitik. When unions are a major source of your support, it is difficult to cross them. But they also have a principled, if erroneous, objection. For the most part, Democrats actually believe that there is some kind of Keynesian magic by which money spent by the government turns into more money. In their view, paying more for public works somehow "creates" money.

Keynes believed that there were limited circumstances in which this might be true (although it's not clear that such circumstances have ever existed) and there are certainly things that the government might buy or build that add value. But the notion that government "injects" money into the economy that was not there before is almost always wrong. We should almost never spend tax dollars with the view that the act of spending itself has intrinsic value. The question should always be on the intrinsic value of the particular goods and services that the government is proposing to buy or provide. We should never want to pay more for these things than we have to.

Still, Democrats can at least claim to be acting on principle. (Of course, it's not that simple. Democrats have a powerful incentive to believe as they do because they live on a coalition of people who benefit from government spending. There is a great deal of self interest at work.)

But Republicans presumably know better. So why does a stubborn minority continue to block reform ? There are apparently no good arguments to be made for their position because no good arguments have been made. Opponents of reform have made an uncommonly silly - and flat out dishonest - argument that eliminating prevailing wage will somehow result in the hiring of workers who are in the United States unlawfully. In fact, it would continue to be illegal for employers to do so.

So I have to believe that the opposition of some Republicans is rooted in fear. That's not unusual. Politicians, as a class, are not notable for their courage (and, yes, I understand that courage does not preclude prudence). But who are they afraid of? It can't - or at least it shouldn't - be unions. They are going to oppose vulnerable Republicans no matter what.

They are afraid of politically connected contractors. There is a lesson here.

I often hear people who don't like markets ask how we can "trust" individual businessmen to get things right. The answer, of course, is that we can't - just as we can't "trust" government to do so. But that fact is not a weakness of markets, it's their strength. Markets establish a system of competition by which the talents, ideas and preferences of millions of individual actors can be aggregated. They don't produce perfect outcomes but, in the great run of cases, they tend to produce better outcomes than any individual actor - including the government - could ever manage.

But support for markets is not the same as supporting the desires of individual market participants. Businesses don't necessarily want to compete. Competitions can be lost. The prevailing wage law is a way for contractors to minimize price competition and exclude new entrants.

Republicans need to recognize that they are the party of competition and not individual competitors.

Cross posted at Purple Wisconsin.