Autonomous motherhood

President Obama is increasingly signaling that universal child-care will be the next big national goal for liberals.  After giving the issue prominent attention in his State of the Union address last month, he has continued talking about it in interviews about his goals for the rest of his presidency.

Obama has proposed significantly boosting the tax credit we provide to families for childcare.  It’s doubtful much gets done on the issue in the next two years.  But these proposals and pronouncements are teeing up childcare to play the role for liberals in 2016 that healthcare played in 2008.

Anticipating this, conservatives have begun staking out their opposition early.  Much of the opposition stems from the idea that by subsidizing working parents, liberals stack the tax code against parents who stay home to provide their own childcare.  The National Review blasted Obama’s plan as an attack on the autonomy of mothers who’d prefer to stay home with their children:

Most mothers, especially of small children, prefer to work part-time or drop out of the labor force for a time. Commercial child care is the least favored option for most parents. The president’s plan encourages families to do what they do not wish to do and penalizes them for refusing.

In place of a targeted tax credit for childcare, the editors of the National Review propose a bigger child tax credit for at least some families: “provid[ing] tax relief to all parents who pay taxes, however they structure their lives, by expanding the tax credit for children. Parents would then be able to spend the extra money on commercial day care, or use it to finance a shift to part-time work for one parent, or save it for future educational expenses — or do whatever they chose with it.”

Note how carefully the National Review limits this proposal to “parents who pay taxes.”  If you’re too poor to have any tax liability, you and your children on your own under this conservative plan.

But more broadly, how serious are conservatives about respecting — and indeed, facilitating — the autonomy of mothers to freely choose how to raise their children?  What about a single mother who would like the same opportunity to “drop out of the labor force for a time” to raise her children while they are young?  To preserve this choice for her would require complete public subsidization of her family’s income — the government would have to pay her a basic adequate income for the work of childrearing.

It’s doubtful that conservatives could stomach this kind of expansion of the public dole.  For one thing, a major consequence of 1990s welfare reform was to toss single moms off of public aid. Twenty years later, conservatives show little hint of longing to re-implement AFDC.

Conservatives would also be deeply wary of this kind of subsidization’s effects on incentives for work and to maintain two-parent households.  Paying single parents enough income to stay home with their children, conservatives would argue, inherently weakens the urgency of both going to work and marrying.

These objections are entirely consistent with conservative policy thinking.  But they also sharply limit the conservative defense of motherly autonomy to married, financially-secure women.  That’s a pretty narrow conception of who merits the right to make an autonomous childrearing choice.

In response to President Obama’s plan to help parents pay for childcare, conservatives want to pay stay-at-home moms, too.  That’s an entirely legitimate position — one that, ideally, produces a resulting compromise of a generous child benefit for all low- and middle-income families.

Still, one must question the depth of conservatives’ willingness to defend motherhood autonomy.  Given their policy commitments, the freedom to choose to stay home turns out to be only freedom for a few.

The conservative Medicaid charade

The New York Times had a good piece last week detailing the still-fraught politics of expanding Medicaid in Red States.  To sum up, while some conservative governors like Mike Pence of Indiana and Bill Haslam of Tennessee are coming around to ObamaCare’s Medicaid expansion, conservative state legislators are still vehemently opposed, and are shooting down carefully crafted expansion plans that their governors had painstakingly negotiated with the Obama administration.

It’s remarkable that the anti-ObamaCare fever still hasn’t ebbed in state legislatures.  But what’s more interesting are the evolving pre-textual arguments that conservatives use to justify opposition to embracing the Medicaid expansion.  Remember, ObamaCare offers the states incredibly favorable terms to expand Medicaid to cover more of the poor and near-poor.  The federal government picks up 100 percent of the costs in the early years of the expansion, and will cover at least 90 percent of the costs forever.

Yet conservatives continue to insist that the federal government won’t meet its obligations.  According to the Times, “Opponents in [Tennessee and Wyoming] said that, among other things, they did not believe the federal government would keep its promise of paying at least 90 percent of the cost of expanding the program. It currently pays the full cost, but the law reduces the federal share to 90 percent — a permanent obligation, it says — by 2020.”

I’ve explained before why this argument is hollow.  The federal government has never made permanent cuts to funding for state Medicaid programs.  Cutting federal funding for the Medicaid expansion would require a change in the law — a change that could only conceivably be enacted by conservatives in Washington.

So this justification is weak to begin with.  But in Tennessee, Governor Haslam called conservative legislators’ bluff with a creative insurance policy: “He had traveled the state to promote [his plan] — and to try to persuade people that it was not part and parcel of the Affordable Care Act, partly because the Tennessee Hospital Association had agreed to pay any expansion costs beyond what the federal government covered.”

Hospitals, of course, are losing eye-popping sums of money in states that have refused to expand Medicaid.  The Urban Institute calculated that hospitals in these states are missing out on some $168 million in reimbursement revenue.  That’s why it’s worth it for Tennessee hospitals to agree to be a last-resort backstop to allay conservative fears that the federal government will bail on its Medicaid guarantees.

Yet even with this guarantee from their hospital sector — and a practical plea to take this incredibly good deal — conservatives in Tennessee stuck to their guns and torpedoed Governor Haslam’s plan.  “Less than 48 hours later,” the Times writes, “his plan was dead after a Senate committee dominated by Republicans rejected it before it could reach the full chamber.”

So why are conservatives still so opposed to expanding Medicaid?  Keep in mind how far to the right the terms of the expansion have shifted from the original uniform expansion called for by the Affordable Care Act.  The Supreme Court opened up the Red State option in 2012, making the expansion voluntary for the states.  This gave conservatives states ample newfound leverage to drive a hard bargain with the Obama administration and to adopt a version of Medicaid on more conservative terms.  In states like Arkansas, Indiana, and Tennessee, the Obama administration has agreed to state proposals to use Medicaid funds to put individuals on private insurance, and even to charge covered individuals small premiums.  It’s a far cry from the original plan, which simply called for an expansion of traditional, single-payer Medicaid.

Yet despite policy concessions from the Obama administration, generous funding terms, and backstop funding by the private sector, conservatives in state government are still holding out.  One Wyoming state senator previewed the revised iteration of the argument against expanding Medicaid: “The argument is that the federal government is already in debt and expanding Medicaid will make it worse,” he said.

This is dumbfounding.  Medicaid is a cooperative federalism scheme, jointly funded by the state and federal governments.  In the warped federalism of this Wyoming senator, the states now have veto power to second-guess Congress’s own budgetary determinations.  Because a state senator from Wyoming somehow knows better than federal legislators what the federal government can afford to spend.

Of course, there’s little reason to engage with the merits of these arguments.  The arguments are hollow, and conservatives barely bother to pretend otherwise.  State level conservatives are simply doing the bidding of their ideological benefactors, the Times notes.  “Tennessee’s chapter of Americans for Prosperity, the Tea Party-affiliated group backed by Charles G. and David H. Koch, and the Beacon Center of Tennessee, a Nashville nonprofit that advocates smaller government, urged the Legislature to scuttle the governor’s plan.”

And scuttle it they did.  Once you cut through the spurious publicly-offered reasons, the real source of conservative opposition to these negotiated plans is straight ideological: that government should be minuscule, and shouldn’t be in the business of guaranteeing healthcare for the poor.  As the Obama administration has learned over and over again, it’s impossible to successfully negotiate with people who oppose government’s basic existence.

The looming constitutional icebergs in King v. Burwell

I wanted to point out a new amicus brief that has been filed with the Supreme Court in King v. Burwell. Professor Abigail Moncrieff of Boston University School of Law and the Jewish Alliance for Law and Social Action have filed a brief drawing the Court’s attention to the numerous constitutional difficulties that arise directly from the petitioners’ understanding of how ObamaCare works. (Full disclosure: I advised on this brief.)

In short, the brief argues that the King petitioners’ interpretation of the Affordable Care Act leads to drastically different regulatory systems in states that create exchanges and in states that do not, targeting refusing states with a destructive and potentially unconstitutional regulatory threat. Under basic interpretive principles, the Supreme Court should avoid this reading of the law and adopt the government’s interpretation, making subsidies available on all exchanges.

In King, the Supreme Court is asked to resolve a question of statutory interpretation. The petitioners argue that the ACA denies subsidies to people who purchase insurance on federal exchanges. The government argues that the law makes subsidies available on any exchange. The Court will decide who’s right.

When determining the meaning of a statute, courts typically draw on a number of interpretive canons. One of these is the canon of constitutional avoidance, whereby courts disfavor statutory interpretations that raise constitutional questions. This is based on the presumption that Congress doesn’t intend to pass laws that violate the Constitution.

Indeed, as Chief Justice Roberts reminded us when upholding the ACA’s individual mandate as a tax three years ago, even when a constitutionally problematic reading is “the most natural interpretation” of a statute, “every reasonable construction must be resorted to, in order to save a statute from unconstitutionality.”

Under this mode of interpretation, the petitioners’ theory of how the ACA operates raises several significant constitutional problems.

First, conditioning subsidies for individuals on whether states establish health exchanges might run afoul of the prohibition on federal coercion of the states. In NFIB v. Sebelius, the Supreme Court ruled that Congress could not threaten to cut states’ Medicaid funding if they didn’t comply with the Medicaid expansion. This threat, the Court said, went beyond a run-of-the-mill incentive and amounted to a “gun to the head” of the states.

The same might well be true for the petitioners’ interpretation of the ACA. (Indeed, the petitioners have repeatedly argued that Congress tried to “coerce” the states to create exchanges, analogizing the subsidies to the Medicaid expansion.) Like Medicaid funding, the value of the subsidies is a massive fiscal inducement, reaching up to $2 billion per state. The condition attached to the subsidies is meant to encourage states to establish an entirely different program — a health exchange. The Court invalidated a similar arrangement in NFIB, where Congress leveraged funds for states’ preexisting Medicaid programs to encourage states to adopt a “new” program — expanded Medicaid. Therefore, petitioners’ interpretation that the subsidies are an incentive for states to create exchanges might ultimately make their reading of the ACA unconstitutional.

More significantly, petitioners’ interpretation sets in motion radically different federal regulatory schemes for different states, targeting states that decline to create an exchange with a perverse subset of federal policies that would wreak havoc on their insurance markets. All states would be subject to the ACA’s community-rating requirements and its prohibition on denying coverage for a preexisting condition. But the employer and individual mandates would be virtually inoperative in states where subsidies are not available. Thus, under the petitioners’ interpretation, states that decline to create exchanges lose subsidies, which means that the mandates will not be enforced in those states.

This regulatory arrangement would devastate state insurance markets. Community rating and prohibited medical underwriting without an individual mandate is the precise recipe for rampant instability and adverse selection on insurance markets, as states like New York, New Jersey, and Massachusetts can attest. Without an individual mandate, individuals face a strong incentive to wait until becoming sick to purchase insurance. This means that insurance pools will become sicker and costlier, causing more healthy people to drop insurance, making pools still sicker and costlier again. Under this regulatory regime, insurance premiums will skyrocket and insurers will ultimately exit the market, making it exceedingly difficult for individuals to get coverage.

Under petitioners’ interpretation of the law, the ACA punishes states that decline to create exchanges with this destructive policy package. Simultaneously, it rewards states that do create exchanges with a fully comprehensive and stabilizing regulatory structure.

This disparate state treatment is constitutionally problematic under the fundamental principle of equal state sovereignty that the Supreme Court relied on in Shelby County v. Holder. In that case, the Court invalidated the Voting Rights Act’s coverage formula that subjected some states to federal preclearance for their voting laws, but not others. This “disparate geographic treatment” is disfavored, for the constitutional presumption is that the states be treated as equals. In the absence of an exceptional circumstance, such an arrangement is likely unconstitutional.

Petitioners’ interpretation inherently creates disparate geographic treatment based on whether a state creates an exchange. And there’s little exceptional circumstance to justify this treatment. The Voting Rights Act was sustained from the 1960s until 2013 by the exceptional condition of historic racial discrimination in voting. There’s no comparable condition that would justify subjecting state insurance markets to such categorically different treatment.

Moreover, the only practical relief from this harsh regulatory treatment available to states declining to create exchanges is to apply for a federal waiver — a procedure highly reminiscent of the preclearance regime under the Voting Rights Act struck down in Shelby County.

This disparate regulatory treatment also likely points a gun to the head of the states under NFIB. In essence, petitioners think that Congress threatened the states with grave economic destruction in their insurance industries if they failed to comply with federal demands to create a health exchange. This seems highly coercive, going well beyond a normal incentive where states retain actual autonomy to make a choice.

Each of these highly problematic scenarios is a direct consequence of the petitioners’ reading of the ACA in King. Never before has Congress threatened to impose a different and destructive set of substantive federal policies in states that don’t cooperate with federal demands.

Fortunately, the Court can avoid wrestling with the problems raised by this unprecedented brand of punitive federalism. It can do so by simply adopting the government’s reading of the law. Because the government reasonably interprets the ACA to make subsidies available on both federal and state exchanges, the subsidies are not wielded as an incentive of any kind. This structure creates none of the constitutional problems that arise from the petitioners’ interpretation, for it treats all states equally.

Therefore, the brief argues, the Court should disfavor the petitioners’ argument because it may render large pieces of the ACA’s operation unconstitutional. The Court should instead adopt the government’s plausible argument that the IRS may make subsidies available on all exchanges under the ACA, protecting insurance subsidies for millions of Americans across the country.

I’ve written about some of these constitutional flaws in the petitioners’ argument on several occasions (among others). It will be interesting to see whether this thread of argument gains any traction before the Court. If the Court rules for the petitioners in King without seeing these constitutional icebergs coming, it will undoubtedly confront them someday soon. And given the scant evidence that Congress intended to use the subsidies as an incentive — let alone that it intended to torch the insurance markets in non-compliant states — the Court should wonder whether it really must let the petitioners steer us toward these icebergs.

A right to paid leave?

Back in May, I spent a post exploring the question of why liberals claimed a right to healthcare in a way that they haven’t claimed for other similar basic human needs. Extrapolating from the push to make healthcare a legislated right, I identified three criteria for when momentum for new social rights builds: (A) the right addresses an essential human need; (B) the right implicates interests that cut across all income levels; and (C) the right causes minimal economic disruption.

Because healthcare satisfied these criteria, it was the “easiest” social right to recognize first. Healthcare wasn’t special, I wrote: “liberals do support positive rights to other similar needs. FDR’s New Deal vision remains the unfinished business of American liberals, intending to tick off his proposed social rights one political mobilization at a time. Under this piecemeal approach, health care now serves as a precedent, with food, shelter, and others to follow in the future.”

For those watching closely, the White House appears to be laying the groundwork for this precise strategy to push for paid family and sick leave for more American workers. In the run-up to health reform, President Obama and other liberals repeatedly asserted that health care is a right and not a privilege. That rhetoric helped build momentum for legislative reform. It argued that reform was a moral imperative, and that we simply had to bear the costs of reform to provide a basic human entitlement.

Building on the success of health reform, the White House is foreshadowing the next liberal movement in social policy reform. Earlier this month, White House advisor Valerie Jarrett published a LinkedIn post arguing that “Paid Leave Is a Worker’s Right, Not a Privilege.” Jarrett explained the emotional ravishment that workers faced when forced to choose between missing work and staying home with a sick child or a newborn. She also pointed out the economic gains for businesses offering paid leave by attracting and retaining superior talent.

How does paid leave stack up under my three-part test? First, it certainly addresses a basic human need. Reproduction, nurturing youth, and resting while ill all fit squarely within the lower tiers of Maslow’s hierarchy of needs. On the threshold does-this-feel-like-a-basic-right smell test, paid leave seems to pass muster.

Second, paid leave is undoubtedly an issue that brings the middle-class into the political coalition for broader access. Vast swaths of average American families lack paid sick leave or paid family leave. Like with pre-reform health insurance, these ostensible rights are currently provided (or not) at the whim of our employers’ HR decisions. When the middle-class is invested in social policy proposal, reform becomes significantly more likely.

Where paid leave might stumble is on the economic disruption question. Rights involve redistribution, as we must transfer resources to provide the right to those who lacked it under the status quo. Under one conception of guaranteed paid leave, the costs of extending this right are borne entirely by employers, who would need to fund employee time-off and cope with staffing uncertainty.

Jarrett attempts to preemptively rebut these concerns by pointing out the benefits of paid leave for employers. But there’s another version of paid leave that avoids the political hurdles of regulatory mandates on employers altogether. We could fund paid leave as a public social insurance program, circumventing an employer-provided regime by compensating sick workers and new parents directly. Doing so would absolve firms of the administrative burden of running these complex insurance schemes.

Moreover, there’s little reason to think that guaranteed paid leave would burden employers any more than guaranteed health insurance has. So under any formulation of paid leave, the economic disruption might be more minimal than first thought — minimal enough to make passage realistic.

Jarrett’s claim to a right to paid leave thus fits sensibly within the framework for new social rights. Liberals are following the model of healthcare reform, seizing the moral high ground of asserting “X is a right, not a privilege.” So while guaranteed paid leave from work might not be a right we find in our Constitution or — for now — any statute, it rings true as a deeper, moral right fundamental to the human experience.

Fixing American childcare

Childcare policy is finally getting its moment in the sun, courtesy of a new push in President Obama’s State of the Union address. “In today’s economy, when having both parents in the workforce is an economic necessity for many families, we need affordable, high-quality childcare more than ever,” Obama declared.

Childcare in the United States has long been a scattershot mess. It has been a distressingly unregulated and uneven non-system, leaving the children of working parents dependent on their family’s purchasing power to pay for decent care. It’s an under-attended national scandal, raising familiar problems of quality, affordability, and access.

Recently, Congress took several important steps to improve American childcare. While reauthorizing the Child Care and Development Block Grant program, it attached conditions a series of conditions to improve the quality of care, such as by requiring background checks and training. It also increased funding for the CCDBG, making it more affordable for more families. And it encouraged states to create Yelp-like websites that would make it easy for parents to vet others’ experiences with potential daycare facilities.

The tripartite problems of quality, affordability, and access in childcare echo those that we’ve confronted in American healthcare. But childcare has little of the entrenched institutional attachment to a particular system that’s analogous to private, employer-provided health insurance. This makes childcare a particularly interesting policy area, for it might be more amenable to fundamental change than healthcare proved to be.

One solution would be to provide free or subsidized public options for childcare at schools or other public facilities. This would be a simple and elegant solution for the core problem in American childcare: the lack of a public option. The public education system’s primary purpose is, of course, educating children. But for working parents, it doubles as a valuable place for children to go during work hours. We provide no such public option for parents with young children. If we entrust the public sector to look after our four- and five-year-olds, there’s little reason to think that they can’t do the same for three-year-olds.

This might sound radical (or even French!), but we had universal childcare in the United States once. As Obama referenced in his speech, the Lanham Act established government-provided daycare so mothers could go to work during World War II.

This was a temporary wartime program, but we very nearly had this same type of system enacted permanently in the 1970s. Congress passed the Comprehensive Child Development Act, which would have created a “national network of federally funded child care centers, with tuition subsidized depending on a family’s income,” as Emily Badger explains. But for President Nixon’s veto, we may have had universal daycare for the last forty years.

The CCDBG reauthorization has taken a different tack, one reminiscent of the structure of healthcare reform established in the Affordable Care Act. It moves us toward a system of state marketplaces for parents to explore childcare options. It tightens quality controls by setting requirements for licensing and requiring due diligence in hiring by care facilities. And it provides subsidies for care among some low-income families purchasing it.

Even within this nascent framework, there’s substantial room to improve our support for working families. The CCDBG’s current funding is only enough to serve one out of every six eligible families. Yet childcare has become prohibitively expensive for all families. The average cost of care exceeded the average homeowner’s mortgage costs in 22 states in 2011. It even exceeded the costs of instate college tuition and fees in 35 states.

Families need far more help than they are getting. Both President Obama and the House Democrats have proposed making care more affordable by boosting our other childcare subsidy, the Child and Dependent Care Tax Credit. Obama would triple it, offering families as much as $3,000 annually for each child under age 5. The House Democrats propose doubling the CDCTC, subsidizing up to 25 percent of childcare costs up to $8,000 per child (or $16,000 for two or more children).

Just as we encountered with health reform, fixing childcare in the United States will undoubtedly raise fraught political tensions. Most notably, subsidizing families who place their children in care facilities raises the question of whether we should likewise subsidize parents who stay home with their children. Conservatives at the National Review have breathlessly portrayed Obama’s CDCTC proposal as an assault on traditional motherhood. “Most mothers, especially of small children, prefer to work part-time or drop out of the labor force for a time,” the editors write. “Commercial child care is the least favored option for most parents. The president’s plan encourages families to do what they do not wish to do and penalizes them for refusing.”

In reality, the CDCTC is no more a tax penalty on stay-at-home parents than the Home Mortgage Interest Deduction is a tax penalty on renters. By helping offset the costs of childcare, the government provides relief to millions of families for whom “commercial care” is an economic necessity. In fact, researchers have seen a slight rise in the number of stay-at-home mothers in response to our current state of affairs, where childcare costs have become so daunting as to make workforce participation an economic wash for some mothers.

Still, there is a strong case for compensating parents doing the serious and socially beneficial work of full-time childrearing. Though doing so might come at an economic cost by removing some parents from the labor force, this is a cost we ought to be willing to bear. It might make sense to simply package the CDCTC and the Child Tax Credit into one large child subsidy. (Indeed, the National Review proposes just this sort of alternative.)  We might give a larger subsidy to children under the age of 5 to compensate parents for providing care before their children reach school age.  And ideally, we might provide this subsidy as a periodic child allowance throughout the year, rather than just during tax season.

Second, how we fix childcare might influence how we design other policies, like family leave.  For instance, how early are we comfortable with putting children in the care of others?  Research seems to indicate that children benefit from spending the first year with their parents. This suggests a need for longer guaranteed parental leave, perhaps six months per parent instead of the three months currently provided by the Family Medical Leave Act.

And third, childcare might be a policy area where it makes sense to impose some kind of employer mandate or otherwise encourage firms to provide for on-site or nearby childcare. Yes, this would impose costs on business, but we could provide tax nudges to ease the burden. And these costs might be worth the benefits — psychic, convenience, and economic — that parents would enjoy from having their young children close by during the workday.

These questions are ones worth grappling with. For too long, our childcare system in the United States has hardly been a system at all. We’re just now beginning to tackle the project of making childcare better and more affordable to the average family — and there’s still much to be done.

The Advantage of a Middle-Out Economy

In advance of the State of the Union address on Tuesday, President Obama has unveiled a number of aggressive policy proposals to combat the wage stagnation that is squeezing the middle-class.

This includes a series of proposed tax cuts for the middle-class that would be funded by new tax revenue from the wealthy. Obama would eliminate a pair of tax preferences that have long subsidized the wealthy through the tax code, closing a loophole that has shielded trust funds from taxation and raising the top marginal tax rate on capital gains to 28 percent (up from 23.8 percent).

This proposal has obvious political appeal for Obama and his fellow Democrats: it’s a populist initiative that forces the GOP to choose between absolutist protection of capital gains and lowering taxes for average Americans.

But it also reflects a deeper debate between the two parties over the core of our macroeconomic policy. Namely, who spurs economic growth in the United States: the wealthy, or the middle-class?

The conservative prescription for accelerating growth has long been to create a business-friendly environment by slashing taxes and relaxing regulations on high earners, who will then invest their savings, expand their businesses, and grow the economy. That’s why conservatives like Sen. Orrin Hatch (R-Utah) were quick to denounce the revenue side of Obama’s tax plan. “Slapping American small businesses, savers and investors with more tax hikes only negates the benefits of the tax policies that have been successful in helping to expand the economy, promote savings, and create jobs,” Hatch claimed.

In response the to top-down growth favored by conservatives, liberals have begun championing “middle-out” economic growth. This budding liberal alternative would have us ease the strain on middle-class budgets on both ends of the balance sheet. It would boost their assets by cutting their taxes and increasing their take-home pay. And it would chip in for their liabilities by making modern-day necessities like health insurance, education, and childcare more affordable.

So which model is more effective for bringing about growth? This largely depends on a pair of economic effects — each of which indicates that liberals have the better path to robust shared prosperity.

There are two different responses that individuals might have to a change in their tax rates. If my tax rates go down, the amount of time I put in working becomes more valuable, which ought to make me work harder and work more, generating more economic activity. Economists call this the substitution effect, because I’d substitute more work hours in place of leisure time.

Alternatively, if my tax rates decline, I might instead realize that I can maintain the same income while working fewer hours. With an unexpected windfall from a new tax cut, I could keep my take-home income constant while working less than I had been. Economists call this the income effect, because I elect to use my new income from the tax cut to “consume” more leisure and thus work less.

So the debate over targeted tax cuts depends on which effect wins out: whether tax cuts make us work more or work less. But there’s reason to think that these effects vary when we look up and down the income scale.

High-income individuals may very well respond to greater disposable income by consuming more leisure. Because they already enjoy economic security, a newfound lower tax burden might incentivize these individuals to work less while taking home the same amount of money. If so, tax cuts for the wealthy are an economic windfall, not a stimulant.

Further down the income scale, middle- and working-class Americans might make the opposite choice and work more hours in the wake of a tax cut. With less of a financial cushion to rely on, making work more valuable ought to encourage more working hours among these individuals. When work becomes more lucrative, leisure time correspondingly becomes more expensive and harder to justify. This generates higher incomes and more economic growth.

So we might expect to get more economic growth out of cutting taxes — and thereby expanding disposable income — for middle-class and low-income Americans than we would by making things easier on the wealthy. This makes intuitive sense: The poor and middle-class simply need new income more than high-earners do for basic survival and security. They therefore respond to policy changes by maximizing their incomes rather than their leisure.

If the wealthy respond to a tax cut by pocketing more leisure time, we’d expect the inverse to be true, too. That is, the wealthy might consume less leisure — and work more — when their taxes go up. This expectation is backed up by behavioral studies demonstrating that individuals tend to react more strongly to prospective asset losses than they do to opportunities for asset gains — a phenomenon known as the “endowment effect.” In the face of a tax hike, then, the wealthy might work more in order to sustain the same after-tax income level.

To promote growth, then, we ought to raise taxes on the wealthy and cut them on the middle-class — precisely what Obama proposes to do. We’d expect this to generate more economic activity than relying on tax cuts for the wealthy. Indeed, this is borne out in the data. Lower income groups have a highermarginal propensity to consume” than the well-off do. That means that they spend a higher percentage of each additional dollar received than the wealthy would, providing greater stimulus for economic growth.

For much of the twentieth century, the United States grew its economy on the back of an ascendant and secure middle-class. It’s not coincidental that rising income inequality corresponded with a shift toward top-down economic policies implemented by conservatives in the 1980s. For the better part of three decades, average Americans have been waiting for a trickle-down that never happened.

As an alternative to the doldrums of supply-side inequality, “middle-out economics” isn’t just some populist platitude. It’s a serious and persuasive prescription for promoting economic growth. It returns the United States to its roots as a society of egalitarian growth and shared prosperity. And best of all, it’s very likely a more effective and pragmatic plan for the economy than the the top-down alternative offered by conservatives.

More than (four) words

The viability of the Affordable Care Act’s subsidies in 36 states is going to be decided by the Supreme Court.  King v. Burwell, the Fourth Circuit iteration of a multi-pronged challenge to availability of health insurance tax credits across much of the country, has been granted cert by the Court to be heard this term.

I’ve written about these cases (focusing on the D.C. Circuit case, Halbig v. Sebelius Burwell) frequently (I, II, III, IV, and V). But as the case readies for it’s moment before the Highest Court, I wanted to take a moment to address a clever rhetorical deceit that is being propagated by those cheering on the subsidy challenge.

That’s the idea that this is a cut and dry case, a foretold outcome based on the unambiguous text of the statute. Take George Will: “Four words in the ACA could spell its doom.” “The four words that threaten disaster for the ACA,” Will writes, “say the subsidies shall be available to persons who purchase health insurance in an exchange ‘established by the state.’ But 34 states have chosen not to establish exchanges.”

Or take Patrick Wyrick, the solicitor general of Oklahoma, who is challenging the law’s subsidies in a separate suit.  “The phrase ‘Exchange established by a state under Section 1311′ ​leaves nothing to the IRS’s imagination​,” he argues at SCOTUSblog.

Indeed, the architect of these lawsuits, Michael Cannon of the Cato Institute, asserts much the same, contending that “the tax-credit eligibility rules ‘clearly say’ exchange subsidies are available only through state-established exchanges,” and that any ambiguity has been retrospectively manufactured by the government’s lawyers.

There’s a reason the challengers in King are so adamant that this is a simple, unambiguous case. If there is any ambiguity in the statute — any uncertainty whatsoever in whether the text permits subsidies in non-exchange states — the challengers likely lose. That’s because ambiguity triggers so-called Chevron deference to the IRS’s interpretation of the law, which favors making subsidies available in all states.

It could also trigger constitutional avoidance doctrine, since the challengers’ constitutionally troublesome and coercive reading of the law would have to compete with the government’s abjectly constitutional, non-coercive reading of how the subsidies operate.

But if what the law says is clear and unambiguous, then there’s no discretion for the IRS to employ, and no deference owed to its interpretation. And there’s no constitutional avoidance obstructing the challengers’ path to victory, because there would be no alternative reasonable interpretation at hand.

Now “established by the State” sounds pretty unambiguous, right? Pretty damning for the government and the law’s supporters, no?

Of course it does. But it’s also a neat sleight of hand, because those four dooming words aren’t the ones that this case hinges on.

Instead, the case turns on two words, not four. Those two words are “such Exchange.” See, Section 1311 of the law instructs that each state create a health exchange. But Congress can’t order the states to do anything, so it created a federal fallback. For states that don’t elect to run their own exchanges, Congress said, the federal government would step in to “establish and operate such Exchange within the State.”

What’s more, the term “Exchange” in the statute is defined as “an American Health Benefit Exchange established under [section 1311 of the ACA].” That’s the section that directs states to create exchanges.

So what does “such Exchange” mean, exactly? One eminently plausible interpretation is that, if you connect the daisy chain of definitions and provisions laid out above, the federal government creates the functional equivalent of an exchange established by the state in each non-compliant state. That is, for purposes of the statute, the federal government can create an “exchange established by the State.”

Counterintuitive, sure. But it’s clearly a reasonable interpretation, as I’ve explained before. And the meaning of “such” is what split the lower courts in the first place. Shouldn’t this alone be enough to suggest ambiguity, which in turn triggers deference to the IRS’s interpretation?

One would think so.  But the ObamaCare challengers evidently insist that the federal government can only create “an exchange,” not “such Exchange,” for it can create one with all the attributes of a state-created exchange except for subsidy availability. Where’s the support for this in the text?

The challengers’ case looks a lot weaker when we hone in on the text of the law that really matters to this case. And liberals like Paul Krugman ought to stop arguing that the law is facing “death by typo,” for it concedes that the law’s text as written can’t accommodate subsidies on the federal exchange.

That’s only the case if you accept the challengers’ false framing of the language that this case turns on. They’re trying to hide the ball behind the seemingly open-and-shut certainty of “established by the State.” But that’s not the language that really matters. And the fact that “such Exchange” is ambiguous is just enough to expose the challengers’ case to potentially crippling vulnerabilities that could spell their doom before the Supreme Court.

The data prove Boehner’s “idea” about the unemployed wrong, wrong, wrong

John Boehner thinks we’ve made it too easy for the unemployed to go without work. Addressing the conservative American Enterprise Institute last week, the Speaker of the House criticized “this idea” among the jobless that “I really don’t have to work. I don’t really want to do this. I think I’d rather just sit around.” To Boehner, our policy has corrosively enabled those inclined toward sloth to give way to that temptation.

This theorizing has been roundly blasted in liberal circles. Paul Krugman characterized it is a revealing gaffe, exposing conservative disdain for the unemployed. Simon Maloy at Salon said that Boehner had gone off the reservation, drifting off-message from efforts by those like Rep. Paul Ryan to move away from (or at least better conceal) makers/takers rhetoric and knee-jerk distaste for the jobless.

But few have discussed the absolute wrongheadedness of Boehner’s policy diagnosis here. He believes that it’s too easy to stay unemployed. The implication is that public policy should make it harder to be unemployed by, say, cutting off unemployment insurance benefits earlier and making benefits stingier to begin with. This, it’s thought, would give these slackers the kick they need to go out and work.

Never mind that unemployment benefits are already unavailable to the vast majority of the unemployed and already historically stingy. As Krugman explains, “Only 26 percent of jobless Americans are receiving any kind of unemployment benefit, the lowest level in many decades. The total value of unemployment benefits is less than 0.25 percent of G.D.P., half what it was in 2003, when the unemployment rate was roughly the same as it is now.”

Yet the idea that our lavish unemployment benefits drive up unemployment rates persists among conservatives. And it persists in the face of clear evidence to the contrary.

For one thing, unemployment benefits vary drastically from state to state. States aim to replace some portion of an unemployed person’s lost wages. Maximum benefits range from Mississippi’s $235 per week to Massachusetts’s $1,019.

If the Boehner Hypothesis had something to it, we might expect to see lower unemployment rates in states providing the stingiest unemployment benefits. But in fact, Mississippi has 7.9 percent unemployment, one of the highest in the country. And Massachusetts has 5.8 percent unemployment, lower than the national rate.

The Federal Reserve recently studied whether extending unemployment benefits had any effect on the unemployment rate. During the recession, the federal government extended funds for state unemployment benefits. These emergency measures made benefits available to those without jobs past the usual 26 weeks of unemployment to as many as 99 weeks. Conservatives regularly fretted that this weakened the incentive to find work, frequently obstructing extensions to provide more help to the jobless.

The Fed, however, found that these extensions had a minimal impact on the unemployment rate and virtually no impact on the number of people participating in the workforce. “[T]he overall effect of EEB [emergency extended benefits] on the unemployment rate is fairly modest; at its peak (in terms of the average number of benefit weeks provided) EEB boosted the unemployment rate by one-third percentage point.” Moreover, “the effect of EEB on the [labor force] participation rate is estimated to have been quite small.”

This is just the latest piece of evidence refuting the Boehner’s Bootstraps Hypothesis. James Pethokoukis at the American Enterprise Institute helpfully summarized a series of studies that found similar results. One study by the Boston Fed found that cutting off unemployment benefits didn’t nudge people to find work, but rather made them “more likely to drop out of the labor force; transitions to a job appear to be unaffected by UI benefit extensions.”

Another study compared the tellingly similar results in North and South Carolina. Last summer, North Carolina slashed its unemployment benefits so severely that it made itself ineligible for federal emergency unemployment extensions. Mirroring the Red State rejection of ObamaCare’s free Medicaid expansion, North Carolina effectively spurned free federal support for its own long-term unemployed.

Economist Justin Wolfers found that since North Carolina cut its benefits, its economy has fared no better than neighboring states with similar economies that didn’t slash benefits for the unemployed. South Carolina, for instance, has seen slightly faster employment growth that North Carolina has. Contrary to the conservative bootstraps theory, North Carolina doesn’t stand out at all from similar states despite its experiment in inflicting hardship on the long-term jobless. “The bottom line,” Wolfers concluded, “is that North Carolina looks quite similar to its peers, and certainly not better.”

The irony is that Pethokoukis’s work comes from the very think tank before which Boehner continued to cling to his disproven theory of what ails the unemployed. The lesson, I suppose, is that Boehner would do well to survey the work from the forums he speaks at.

And he’d do well to heed Pethokoukis’s conclusion that the “safety net supported American incomes during the recession and its aftermath” — jobless benefits included. It’s time we lay to rest the conservative notion that the jobless need constant work incentives, and maybe instead just need some financial support to help them afford things like Internet, new suits, dry-cleaning, resumes — you know, things that cost money that help people find a job.

Instead of moralizing against the unemployed, we should understand that unemployment insurance plays an important role in helping people through hard economic times. The unemployed don’t need a kick in the pants to help them find work, they need a stronger economy. And that comes when everyone — the jobless included — has a little more spending money in their pockets.

Hey, Congress actually did something! — and made American childcare a little better in the process

Stop the presses: Congress actually passed a bill last week. An overwhelming bipartisan majority in Congress voted to reauthorize the Child Care and Development Block Grant program, a $5 billion fund for the states to subsidize the cost of childcare for low-income families, which President Obama is expected to sign. And in the process, it patched some glaring holes in our childcare system to make it a little better and safer.

Calling what we have a childcare “system” is frankly too generous. What we have in much of the country is a lightly regulated mess. In a highly-regarded piece last year called “The Hell of American Daycare,” Jonathan Cohn of the New Republic exposed the neglectful patchwork of state under-regulation that led a tragic fire at a home daycare in Texas.

“Excellent day cares are available, of course, if you have the money to pay for them and the luck to secure a spot,” Cohn explained. “But the overall quality is wildly uneven and barely monitored, and at the lower end, it’s Dickensian.”

Some states require hardly any training for daycare providers in health, safety, and child development. As the Center for American Progress has noted, only 13 states even require background checks for workers at daycare centers—and four states don’t even screen for sex abuse history. Sixteen states permit teachers without a high school degree or G.E.D. to lead a daycare center.

Despite lackluster quality, daycare costs continue to soar. Average annual childcare costs are nearly $8,000. For families earning less than $18,000, the rising cost of childcare has consumes a prohibitive 39 percent of monthly income. Researchers believe this has led to a recent uptick in the number of stay-at-home moms, as the prospective cost of childcare leaves little net gain from working.

There are two federal programs that attempt to ease this financial burden. The Child and Dependent Care Tax Credit subsidizes some of the cost of childcare for families. It provides up to $1,050 per child for families earning below $15,000 a year, steadily decreasing to $600 for families earning over $43,000. However, it is nonrefundable, meaning any subsidy for low-income families’ childcare expenses is lost once their tax liability reaches zero.

The second program is a $5 billion annual block grant to the states to pay for childcare for low-income families. It was last authorized in 1996 as part of congressional welfare reform, but Congress had not previously attached strings to the grant to promote childcare quality.

Until now. When Congress reauthorized the CCDBG program, it attached important regulatory conditions addressing some of the hellish problems plaguing American daycare. If states want funding, their daycare centers must now run background checks on all employees. Providers must be trained in first aid, safe sleep practices, emergency preparedness, and avoiding shaken baby syndrome. And states must conduct annual random inspections of each daycare facility, publicizing the results online — a major improvement given that states like California and Iowa had been conducting inspections only once every five years.

These are significant reforms that ought to improve the quality of care across the country. They bring some uniformity to what had been a wildly disparate field of state regulations, bringing into the twenty-first century the places where 11 million children under the age of 5 spend most of their days.

But there’s still much more to be done. Though the reauthorization increases CCDBG funding somewhat over the next six years, it remains an underfunded program. It serves only one out of six eligible families, leaving long waiting lists for vouchers and subsidized daycare seats in many states.

Low-income families who aren’t lucky enough to get subsidized spots continue to pay out larger shares of their income for worse care. And a $600 tax credit for middle-class families is a relative drop in the bucket, enough to cover only about a month of childcare costs for the average family. It’s a drag on our economy when parents can’t justify working in the face of expensive childcare.

Still, it’s heartening to see Congress responding to an under-noticed national crisis. Reauthorizing the CCDBG with conditions to improve quality was the right thing to do. Perhaps going forward, the bipartisan coalition behind the reauthorization will push for more support for working families in order to expand childcare access and affordability.

What would conservatives do with Medicaid?

State-level Republican governors and legislatures are using the voluntary Medicaid expansion to leverage conservative policy concessions from the Obama administration. In states like Missouri and Pennsylvania, this has meant trying to enact work requirements for Medicaid. This would mean that, to receive Medicaid coverage, low-income Americans must be working, actively seeking out work, or participating in a job-training program.

This would be a significant departure from how Medicaid programs are currently constructed. No state has a work requirement for Medicaid — the original Medicaid statute prohibits conditioning coverage on work participation. And the Obama administration has flatly refused to grant a Medicaid waiver for proposed work requirement rules, so these state proposals are unlikely to become law anytime soon.

Nonetheless, the conservative instinct to condition health insurance for the poor on working is telling. And if a Republican wins the White House in 2016, red states would gain a new hearing to enact these ideas through federal waivers.

Interestingly, the attempt to tie Medicaid to working comes at the exact moment that health economists and policy wonks across the political spectrum are aiming to decouple of health insurance from employment for everyone else. Most economists consider traditional employer-sponsored insurance to be inefficient, as it locks workers into their current jobs for fear of losing coverage. They’ve therefore supported reforms to let individuals purchase insurance outside of their workplaces, like ObamaCare’s exchanges.

Some conservatives favor doing just the opposite when it comes to insurance for the poor. True, Medicaid coverage doesn’t have the same job-lock issues as employer-sponsored insurance. It’s a single-payer system, so it follows you from job to job.

But the urge to link Medicaid to employment flows from the conservative obsession with legislating work incentives for the poor. To some conservatives, any government benefit that reaches the poor must be conditioned on working, seemingly because poor people supposedly need constant shocks and prods to keep them employed.

Prominent conservative health economist Avik Roy showed the foolishness of this line of thinking in a recent interview. Roy, the author of How Medicaid Fails the Poor, recently released a conservative healthcare reform proposal detailing how we can “transcend” ObamaCare, using its existing structure to achieve conservative policy preferences.

In the interview, Roy explained — and justified — why his proposed revamp of Medicaid doesn’t include a work requirement:

 “[S]omebody asked me the other [d]ay, he said ‘Avik, is there a work requirement … ‘ (A conservative asked me this …) ‘Is there a work requirement in your plan for eligibility for these exchange subsidies for low-income people?’ and I said no.

“The guy said: ‘Well that’s a problem. We should have a work requirement.’

“I said to him: ‘Would you ask for a work requirement for a low-income unemployed parent to send his child to primary school?’ Of course he didn’t answer.”

Now of course, there may be conservatives for whom this point isn’t an argument-stopper — they may very well support work requirements for parents to send their kids to public school. After all, we’ve seen recent conservative discomfort with giving school kids government handouts in the form of free school lunches.

Though he defends public health insurance for the poor from shortsighted work requirements, Roy is hardly a fan of Medicaid. In Transcending ObamaCare, he argues that it generates little in the way of beneficial health outcomes for the poor in comparison to going uninsured.

Roy acknowledges that the root cause of this has been low Medicaid reimbursement rates to physicians. Doctors are reluctant to take Medicaid patients because Medicaid pays so little. Studies have found Medicaid patients are denied doctors appointments six times more often than those with private insurance — even when they tell the doctor that their child has a serious medical illness.

Why does Medicaid pay so much less? It’s because of the quirky and inefficient cooperative federal structure of Medicaid. “Medicaid is jointly funded by state governments and the federal government,” Roy explains. “Because neither party has full responsibility for the program, both parties have engaged in irresponsible behavior.” Federal regulations prohibit states from charging more to Medicaid patients, and states have responded to budgetary crises by slashing reimbursement rates, plunging as low as 29 percent of private reimbursement rates in New York.

(It should be noted that comparing Medicaid and private insurance reimbursement makes Medicaid look exceptionally bad. It fares a little better when compared to what Medicare pays, as calculated by the Kaiser Family Foundation. For instance, New York’s Medicaid program pays 55 percent of the Medicare rate, and the average state pays about two-thirds of what Medicare pays. Still underfunded, but a bit better.)

Roy’s solution is to blow up Medicaid and give the poor subsidized private insurance on health exchanges. Very well. It’s a totally legitimate proposal that would extend ObamaCare’s subsidy-exchange structure to those below 133 percent of the federal poverty line — the current cut-off point between expanded Medicaid and ObamaCare’s marketplaces.

And in the Obama era of liberal pragmatism, it’s a proposal in spirit with the technocratic amenability to using any practical means to achieve progressive goals. Obama wanted to enact affordable universal coverage in the United States — long a liberal goal — but didn’t mind using Mitt Romney’s private insurance-based marketplace structure to get us there, rather than insisting on liberal means like single-payer.

In the Medicaid expansion already, the administration has been willing to accept conservative ideas on how to extend health insurance to the poor. Indeed, Roy’s plan would largely mimic the so-called “private option” that Arkansas negotiated with the Department of Health and Human Services, using Medicaid funds to subsidize private insurance for those newly eligible for Medicaid coverage.

These are fine ideas, but are hardly the only way to heal Medicaid’s woes. As Roy explained, Medicaid’s problems stem from low reimbursement rates, which in turn stem from its inefficient joint federal-state financing structure. So why not simply federalize Medicaid? The federal government is better positioned to sustain social insurance programs than the stares are. It faces less budgetary pressure, particularly during recessions, because (unlike the states) it can run up deficit spending when social welfare program rolls expand in a weakened economy. This stabilizes financing for these sorts of programs, preventing them from being hollowed out by emergency state budget cuts.

The federal government could then raise reimbursement rates to something closer to what Medicare pays. And to get rid of any lingering discrimination against Medicaid patients, it could simply make such discrimination illegal, relying on testers in the same way housing discrimination laws are enforced.

Yes, this would cost the federal government more, but it would also relieve the states of a significant budgetary burden. It would also better serve the poor, as historically, the federal government has been a far better steward of low-income programs than the states have been. (See welfare reform / TANF; the 24 Medicaid expansion opt-out states; etc.)  And it might even save the government money in the longterm by letting the poor get more check-ups and preventive care, keeping the government from footing costly ER and advanced illness bills later on.

Still, Roy’s proposal is a refreshingly thoughtful constructive critique of ObamaCare — an all-too-rare conservative feat in the years since healthcare reform. If nothing else, maybe it will teach conservatives to love (or at least begrudgingly accept) ObamaCare by showing that it lays a foundation that they too can work with, finally breaking that fever that has plagued conservative politics since 2009. And though Roy would revamp Medicaid, at least doesn’t want to shackle the uninsured poor with work requirements.