Archive for March, 2010

Obamacare is Unconstitutional – Part 1                                                  

For those of you that read my blog on a weekly basis mostly to get your dander up, I will not disappoint you this week.  To get right to the point, plain and simple, the newly passed “Obamacare” health care reform legislation is unconstitutional on many levels and Republicans if they have any political principles at all will run this November on a platform promising to repeal the measure in its entirety. 

However, they may be saved from this act of unusual courage on their part if state attorneys general have their way.  Currently, there are already lawsuits filed by 14 states against the law.   The suits rightly state that, “The Constitution nowhere authorizes the United States to mandate, either directly or under threat of penalty, that all citizens and legal residents have qualifying health care coverage.”  This argument before any court should be enough to at least invalidate that portion of the law.  And if that portion is struck down then the financing mechanism for making the law somewhat viable is removed and the scheme falls flat on its face.

The states have chosen the portion of the new law that will give them the greatest chance of success in the courts.  After all, it was deemed necessary at the beginning of the last century to pass an amendment to the Constitution allowing Washington to collect income taxes from Americans.  How come an amendment is not required for Washington to order Americans to pay for health insurance? 

But, there are also many other constitutional arguments that can be leveled against “Obamacare”.  Article 1 Section 8 of the U.S. Constitution enumerates 18 specific powers granted to Congress.  Healthcare is not one of them and as a matter of fact the responsibility for regulating the industry has historically fallen to states.  States license doctors, hospitals, and have insurance commissions responsible for regulating rates and services.  Of course, liberal interpreters of the Constitution will point out that there are two clauses in that same section which support their view that Congress has nearly unlimited powers when it comes to providing for the well-being of Americans.

The first clause is the “General Welfare” clause, “The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States…”  Taken in context, general welfare is not separated by commas from “to pay the debts” and “common defense”.  Therefore, the Congress has the power to provide for the general welfare of the United States by maintaining a common defense and paying the debts in the pursuit thereof.  The phrase does not give Congress unlimited powers.  If it did there would be no need for the 16 enumerated powers that follow in the same section.

The second clause liberal interpreters of the Constitution point to in order for Congress to do whatever it wants to is the “necessary and proper” clause.  It reads, “To make all laws which shall be necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof.”  Many have labeled this the elastic clause which is about as accurate a label as the “Patriot Act”.  The first part ending with “foregoing powers” obviously relates to the 17 previously mentioned enumerated powers in Section 8.  The bone of contention is the phrase, “…all other powers vested by this Constitution in the government of the United States, or in any department or officer thereof.”  What are these other powers?  To liberal interpreters it means anything Congress feels should be done for the ‘general welfare”.  The real answer is the powers specified to Congress outside of Article 1 Section 8 of the Constitution. 

Article 2 dealing with the Executive Branch is a good example.  In Section 1 of that article Congress has been given the power, not enumerated in Article 1 Section 8, to determine the time for choosing electors of the Electoral College.  Article 2 Section 2 gives Congress power to enact laws dealing with certain appointments of the president.  There are several amendments  that give Congress power to, “enforce this article by appropriate legislation”.  These powers of Congress not found in the article dealing with the legislative branch are “necessary and proper for carrying into execution all other powers vested by this Constitution in the government of the United States…”  That was the original meaning of the necessary and proper clause.  Furthermore, health care is not specified in any of these other powers, thus it is outside of Congress’s powers under federalism and a clear violation to the Constitution. 

The Constitution grants very limited powers to all three branches of government, not just Congress.  Those powers are enumerated and delegated in the document.  To believe otherwise ignores the actual text and the historical context the document was written in.  Why would individuals give unlimited power to a new government when they had just risked all they had to overthrow the unlimited tyrannical powers of another?  They wouldn’t.  This is why a strict constructionist interpretation is correct and why Obamacare is unconstitutional.

Part 2 will deal with the interstate commerce clause and why it is important to adhere to the Constitution.    

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina.

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So-called health care reform passed today.

  • Reform was supposed to cut costs for health care. Instead it increases them.
  • Reform was supposed to ease the burden of health care on businesses. Instead it imposes a fine on businesses for not providing health care, and tightens the relationship between employment and health insurance coverage.
  • Reform was supposed to increase choice in the health care marketplace. Instead it forces people to purchase health insurance from existing providers. It compels people to purchase health insurance no matter what their employment situation, whether they want it or not. It imposes a fine on people who do not comply.
  • Reform was supposed to make the delivery of health services more efficient. Instead it creates new rules and procedures, including fifty state-run health insurance exchanges, that add complexity to the health care system and make streamlining even more difficult than it was before.
  • Reform was supposed to be carried out consistent with government’s pledge to impose no new taxes. Instead it creates new taxes to cover the cost of covering the currently uninsured, in addition to the fines cited above.
  • Reform was supposed to take into account the interests of all parties involved in health care: patients and their families, doctors and other health care providers, insurance companies, hospitals and clinics, medical device manufacturers, pharmaceutical companies, state and federal governments. Instead it satisfies a narrow group of determined people in the Democratic party, and shows no evidence of compromise among these group interests.
  • Reform was supposed to bring us, if not together, at least into a national conversation about how to improve the delivery and funding of health care services. Instead many are angry that health care reform should have taken such a wrong turn while so many interested parties were excluded from the legislative process.
  • Reform was supposed to secure Medicare’s fiscal health for at least the next generation, and contribute to the fiscal health of the federal government in general. Instead the main anxiety about health care reform is the impact it has on the government’s books. Few are confident we can pay for it.
  • Reform was supposed to be an opportunity for political parties to work out necessary compromises. Instead the process of reform began with the majority party telling the minority party to get out of the way: we don’t need you and we don’t need to listen to you.
  • Reform was supposed to give people peace of mind that when they have a failure of health, or when they need professional health services, quality services would be available. Instead we are anxious about what the future holds, and doubtful that quality services will actually be available when we need them.

Did you notice that as Nancy Pelosi crowed about passage of the legislation, she pointed approvingly to Medicare? Democrats proudly applauded their work as the biggest improvement to health care since the enactment of Medicare. But over decades Medicare gradually caused the federal government to go bankrupt! A key impetus toward reform in the first place was government’s inability to keep funding Medicare at such a high level. Opponents of Medicare predicted that would happen, and it did. What solution did the Democrats offer to deal with this budget crisis? You have it in front of you now. If you see effective cost containment in this bill, please tell me because I can’t find it.

Tell me again why, if health care is a right, the government forces me to buy it? That’s like saying you have freedom of worship, and we’ll force you to attend church every Sunday. You also have a right to vote, and we’ll fine you if you don’t go to the polls on election day. I have a right to bear arms, too, but who can tell me I have to carry a handgun?

Fact is, health care is not a right listed in our Constitution, nor have the courts written that people, as citizens, are entitled to it. Forcing people to buy it is clearly unconstitutional. A long time ago, however, the federal government turned the Tenth Amendment on its head: all rights and powers not expressly granted to the states are reserved for the national government. We’ve operated according to that counter-productive principle for more than a century now, and it will take a revolution that originates with the states to recover the powers that belong to them. Let the resistance start now. Who has the courage to stand against this corrupt Congress and its overreaching leaders?

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What do you call a guy who approves a policy or an action, then calls the action unconscionable without admitting that he made a mistake?


I’d say that’s a person who is untrustworthy. I’m sure Bernanke sees the matter differently.

George Stigler, an economist at the University of Chicago before his death in 1991, developed a theory of regulatory capture that explained why government keeps failing in its efforts to oversee economic institutions. Again and again, we see that supervisory governmental agencies become beholden to the institutions they’re supposed to regulate. The SEC and its failure to investigate Bernie Madoff is a recent example of that.

Bernanke’s and Paulson’s bailouts take this idea several steps further. These actions involved so much money, and showed government officials acting in such disarray, fear and panic, that they’re evidence of state capture by large financial institutions. We’ve never seen anything like that before.

We’ve seen cases in our history where the balance of power between Wall Street and Washington shifted this way or that, but we’ve never seen an instance where Wall Street’s interests dominated Washington’s decision making to this degree. Everything that followed the bailouts, including the business-as-usual bonuses, stalled financial reform, policymakers’ fussing and fuming right up to the president himself, and the bailouts’ complete failure to loosen up credit or deal with so-called troubled assets – all of these developments after the crisis show that large financial institutions captured the state, then drew down the public treasury to ensure their own survival.

Large financial institutions said that if the Treasury and the Fed did not fork over the money, we would see a depression worse than anything we have ever experienced before. They said that if the government did not back them up, the entire financial system would collapse. A lot of important people took their word for it, and they turned over our assets to the bankers. In so doing, they changed the morality of our financial system forever. The policymakers like to talk about moral hazard. What a euphemism to distract from their own failure to do what’s right! They can’t justify or defend what they did in normal terms, so they throw out this stupid phrase to acknowledge that perhaps what they did wasn’t quite the right thing to do. Prevarication is the first refuge of cowards.

Moral hazard actually has a specific meaning in the economic lexicon. It means lack of incentive to guard against risk where one is protected from its consequences. Insurance is one way to protect yourself against risk. Asking for taxpayers’ money is another way. Threatening to take the country’s financial system down with you adds an extra layer of moral hazard to the process. The result’s the same whether you ask or demand: you use money that’s not yours to meet your financial obligations. You can go to Las Vegas and lose several million dollars, but it doesn’t matter because you ask other people to cover your debts. Later you act as if it was an unfortunate incident. No, it won’t happen again. Yes, we’d like to forget about it, wouldn’t you? Thank you, let’s stay friends. No hard feelings.

Meantime, we have fifteen million people unemployed, and we are still trying to create jobs for them by spending public funds. Most of those people did not gamble. Most of them conducted their financial affairs with integrity. They acted responsibly, honestly and openly. They lost their jobs in a panic they didn’t create, and they can’t find work now even though the panic is past. Family’s are falling apart, homes are still coming under foreclosure, and we are losing desperately unhappy people to suicide every day. And Bernanke says the bank bailouts were unconscionable. I know what’s unconscionable: bankers without integrity, bankers who greedily take risks with other people’s money, lose on their bets, ask others to cover their losses, and don’t admit they did anything wrong. Bernanke participated in that process because it unfolded on his watch.

Everyone makes mistakes, but bankers seem to have more difficulty admitting them than others.

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I have said it before and I will say it again, Congress is a rotten, stinking corpse.  It is no wonder that it currently has the lowest approval rating of all time.  This week more ridiculous legislation was introduced in that body that will only make our lives worse.  The bipartisan bill that was introduced would punish any country that practices currency manipulation as an unfair trade subsidy.  It would give President Obama the ability to impose retaliatory protectionist measures to level the playing field.  Of course, the impetus for the legislation is China’s alleged undervaluing of its currency, the yuan, in order to support Chinese exports to other countries.

Now, it’s funny, how the legislation comes in an election year when there is a very strong anti-incumbent mood amongst the electorate.   Many Americans who have lost their jobs in this depression are naturally fixated on statements from Washington dealing with job creation.  So as not to disappoint, Democratic Senator Charles Schumer was quoted as saying, “”There is no bigger step that we can take to promote job creation here in the US than to confront Chinese currency manipulation.”  This sounds logical on the surface, but upon closer analysis the senator as usual has it all wrong.

In the first place, to even threaten protectionist measures in such a fragile economic environment as we live in is dangerous.  The Smoot-Hawley Tariff was passed in 1930 and placed protective tariffs on thousands of imports coming into the United States from abroad.  At the time, during the Great Depression, its purpose was to protect American jobs.  Sound familiar?  Instead, the tariff caused our trading partners to retaliate with tariffs of their own thereby exacerbating an already horrendous employment situation.  What makes our politicians believe that China would not retaliate with protective measures of its own or worst yet cause the collapse of our currency by flooding the world markets with hundreds of billions of dollars it keeps in reserve?

But secondly, and much more importantly to our situation, we need inexpensive Chinese products otherwise our inflation rate would be through the roof and unemployment would be right there with it.  Here is the vicious cycle of events that is American/Chinese trade relations.  China’s products are cheaper because the cost of doing business there is less than in the U.S.  Thus, we purchase Chinese goods with dollars and treasury notes. China holds these dollars and interest-bearing bonds in reserve and then prints yuan to pay off the Chinese suppliers of our purchases.  When the smoke clears, we get cheap Chinese goods to buy, the Chinese manufacturer makes a profit, and the Chinese government acquires more units of the world’s reserve currency.  Everybody wins, right?

If the Obama Administration ends this cycle by imposing protective tariffs on Chinese goods coming into the United States, not only will the Chinese government reciprocate with retaliatory measures of its own, the prices of goods in the U.S. will rise sharply.  You see right now we export our inflation to China by way of treasury bonds and newly printed Federal Reserve notes.  Without the ability to export our debt and a lot of the dollars the Federal Reserve has been printing, all of that liquidity will be spent in the U.S. instead on more expensive goods.  As more money enters our economy prices in general will be bid up and will rise and given how much the Federal Reserve has inflated the money supply over the last few years prices will rise by a lot.  At that point, Economics 101 tells us that high prices will squelch demand and huge increases in unemployment will result.

Since the 1970s, the politicians in Washington have placed us in this no win situation with regard to trading with China.  They have destroyed our industrial base with unconstitutional mandates and regulations, and collective bargaining laws.  They have spent us into oblivion by financing a welfare/warfare state unmatched in human history.  If we impose protectionist measures against China we will incur inflation in the short run and high unemployment in the long run.  If we continue to borrow from China to buy their inexpensive goods we put ourselves on an unsustainable course.  At some point, if it isn’t happening already, China will stop financing our purchases and absorbing our inflation.  They will sell their goods elsewhere and Americans will pay higher prices.  Our standard of living will plummet and China will replace us as the world’s number one economic superpower.

But, Chuck Schumer and his colleagues on the Hill are oblivious to all of this.  Of course, they also ignore the fact that the Federal Reserve is the biggest currency manipulator in the world.  Ben Bernanke and his cabal of economic central planners better known as the Federal Open Market Committee fix interest rates and determine the supply of money.  These actions directly determine the value of the dollar.  Before Congress complains about China for not using market forces to value the yuan it should look in the mirror. 

And that is really why I consider Congress a rotten, stinking corpse.  Time and again its members grandstand for personal political gain and leave the American people with the mess.  Its hypocrisy is appalling.  Lastly, it seems like it is constantly coming up with cockamamie schemes to ruin our economy further.  This latest scheme places the blame on China for our own financial incompetence.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina.

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The 2nd Amendment to the Constitution is one of the most debated portions of that document.  For generations the controversy in question is whether the Founders intended to give the right to keep and bear arms only to militias or also to individual citizens not serving in the military.

The Supreme Court may be on the verge of settling the issue once and for all.  Last week, the High Court heard arguments in its second big gun rights case in the last few years.  In 2008, the Court ruled in District of Columbia v. Heller that Washington, DC’s ban on gun ownership was unconstitutional.  The ruling was a landmark decision for proponents of 2nd Amendment rights, but it only applied to federal enclaves like the District of Columbia.  However, the case opened the door for a challenge to national gun ban laws.  Currently before the Court is McDonald v. Chicago.  At issue is whether Chicago’s gun ban is constitutional under the 2nd Amendment.  The Court’s decision in this case will determine whether 2nd Amendment rights go beyond federal property and can be applied to the states and local governments.

Things look promising for gun rights advocates in McDonald based on a quote from the majority opinion penned by Justice Scalia in Heller.  In Heller, Scalia stated, “There seems to us no doubt, on the basis of both text and history, that the Second Amendment conferred an individual right to keep and bear arms.”  He supported the majority’s position by stating the fact that gun possession was a right of Americans “…prior to the formation of the new government under the Constitution and was premised on the private use of arms for activities such as hunting and self-defense…”  Now, we have all heard the stories of the rugged frontiersmen with their guns they used for securing dinner and protecting the homestead.  Thus, Scalia’s argument makes perfect sense.  How could the authors of the Bill of Rights not guarantee a right early individual Americans already had and one so vital to their survival?  The idea that the right was not protected through the 2nd Amendment is preposterous.

But there is more from the majority opinion that supports 2nd Amendment rights for individuals.  The Court saw the individual’s right to keep arms as an important preservation of the citizen militia.  According to Scalia, “The individual right facilitated militia service by ensuring that citizens would not be barred from keeping the arms they would need when called forth for militia duty.”  At the time of the 2nd Amendment’s drafting, a militia was “the body of all citizens capable of military service”.  Thus, whether young, middle aged, or old the country may call upon you in an instant to serve in a militia to put down an insurrection or defend against foreign invasion.  Denying you the initial right to own a gun that could be needed to defend the country in a time of emergency would have been counterproductive.  The Court’s reasoning in support of individual gun rights is compelling to say the least.

Getting back to the current case before the Court, if the justices are consistent and overturn Chicago’s gun ban they will have to justify their applying the 2nd Amendment to states and local governments.  Remember that Heller only applied to firearm possession on federal property.  But, the means to apply the 2nd Amendment to states and localities is simple.  Over time, the Court has used the 14th Amendment to bind states and localities to recognizing the 1st, 4th, 5th, 6th, 7th, and 8th Amendment rights of their citizens.  In part it reads, “No state shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any state deprive any person of life, liberty, or property, without due process of law…”  If the Court grants individual Americans the right to keep and bear arms under the 2nd Amendment it will apply the right to the states under the 14th Amendment.

The current Supreme Court has a golden opportunity to set the record straight with regards to individual guns rights under the 2nd Amendment.  The debate over the years has been very contentious with both sides misquoting the Founders’ statements about gun rights to suit their purposes.  The Founders made a lot of statements about gun rights and how they apply to citizen militias.  Understanding that at that time citizen militias meant “all citizens capable of military service” it is easy to come to the conclusion that the 2nd Amendment bestows a right to gun ownership to all individual Americans.  Fortunately for America, it appears the Supreme Court will come to the same conclusion later this year.

Kenn Jacobine teaches internationally and maintains a summer residence in North Carolina.

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