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CEI - Supreme Court Concocts "Rational Tax Test" In Health Ruling

Upholds Purchase Mandate as Tax While Congress, President Insist It Is Not

Washington, D.C., June 28, 2012 – Statement by CEI Senior Fellow Gregory Conko:

In enacting the health care individual purchase mandate, Congress and President Obama insisted that the measure was not a tax. Unfortunately, the Supreme Court refused to take them at their word. But at least the Court did not uphold the mandate as a legitimate exercise of Congress’s power to regulate commerce. Doing so would have granted government essentially unlimited authority over every aspect of the lives of Americans.

But the decision to uphold the mandate as a tax is troubling, like the Court’s prior commerce clause jurisprudence. Under the so-called “Rational Basis Test,” the Court has refused to question due process or equal protection violations when Congress’s reason for enacting the law might be “rationally related” to a legitimate government interest. Under that test, however, Congress does not have to explain why the law was “rational” as long as the Supreme Court can substitute its own rationale. Today’s decision says Congress does not need to call a regulation a tax—Congress and the President can even insist it is not a tax—if the Supreme Court can rationalize it as one: the Rational Tax Test.

Today’s decision gives ObamaCare a temporary reprieve. But an overwhelming majority of Americans have made clear that they do not want this health care law. Two years ago, then-House Speaker Nancy Pelosi insisted that Congress had to “pass the bill so that you can find out what is in it.” Well, Americans have now seen what’s in ObamaCare, and they want to see it repealed and replaced.

It was a dereliction of duty for the Supreme Court to uphold the individual purchase mandate. But eliminating the mandate alone would not have been enough. ObamaCare has been called a “government takeover” of American health care. But the sad truth is that, even before ObamaCare, federal and state government programs were already in direct control of close to half of all U.S. health care spending. In addition, private health insurance has for decades been subject to extensive state and federal regulation governing who must be covered and how.

In a very meaningful sense, government took over health care long ago. That has to change if health care reform is to be successful.

The core problems in America’s health care system – high and rising prices, lack of consistent and reliable access for millions, rampant cost shifting, and an inability to distinguish between effective and ineffective services or between high and low quality, to name just a few – stem primarily from existing government interventions in the market for health care and health insurance. It will take more than some minor tweaks to repair America’s health care system, and returning to the status quo won’t be enough. Congress should now commit to a major overhaul that will cure the system’s endemic flaws.

Real reform will require dismantling the layers of overlapping regulatory fixes imposed from Washington over the past decades. In addition to streamlining entitlement programs, Congress should eliminate the tax disincentives that push individuals into employment-based insurance, scrap federal and state rules that dictate health plan design, open up competition among health care providers across state lines, and put more purchasing power in the hands of individuals.

Statement by CEI Senior Counsel Hans Bader:

This is a perverse decision that allows politicians to avoid political heat by denying that something is a tax in order to pass it, as Obama and Congressional leaders did, when they pretended they had kept Obama’s pledge not to raise taxes on anyone making less than $250,000 a year. By doing so, it undermines political accountability, despite the fact that ensuring such accountability was a chief purpose of the Constitution.


CEI - Threat of Pension Fund Bailouts Lurks in Senate Highway Bill

"Pension Smoothing" a License to Make Up Numbers

Washington, D.C., June 27, 2012 – Hidden in the ever-expanding Senate Highway Bill (S. 1813) is a provision that would make the already serious problem of pension underfunding even worse. The bill’s Section 40312 would amend the Employment Retirement Income Security Act (ERISA) to allow for an accounting gimmick known as “pension smoothing,” whereby pension managers spread losses out over several years, while overestimating projected investment returns.

Specifically, this provision would expand the range of allowable projection figures, starting this year at a 20 percentage point range, to 60 percentage points after 2015. This is essentially a license to make up numbers for income projections four years out from now. Supporters of the bill claim that this change is expected to bring in $9.5 billion over 10 years, to partially offset the Senate’s $13.5 billion general revenue bailout of the ailing Highway Trust Fund. Due to the modified pension contribution formula, employers are expected to contribute less toward untaxed pension fund assets, which will increase the total amount of taxable income.

CEI Transportation Policy Analyst Marc Scribner said: “Pension smoothing is notoriously unreliable. This accounting trick will likely expose taxpayers to potential pension fund bailouts in the future. It is absurd that the highest levels of congressional leadership did not bat an eye at this massive funding gimmick, which accounts for nearly one-tenth of total MAP-21 funding. Perhaps they did not bother to read the legislation that so many – from Sens. Barbara Boxer and James Inhofe to President Obama – championed as a model of bipartisan cooperation.”

CEI Labor Policy Analyst Ivan Osorio said: “Section 40312 of the Highway Bill threatens to make a bad problem worse. It would further remove pension investment return projections even further from reality, by expanding the range of allowable projections so broadly as to render them meaningless. To add insult to injury, by enacting this, Congress would be working at cross purposes with the Governmental Accounting Standards Board’s efforts to improve pension accounting in the public sector.”

See related:

Highway Bill Would Continue Pension Underfunding Shell Game

The Highway Bill’s Sleeper Funding Provision: Pension Smoothing


CEI Today: Union pension bailouts, EPA carbon regs, and Supreme Court on immigration


Everyone hates a bailout. Or at least that’s what everyone says, until circumstances force some business leaders to seek them and politicians to grant them — all in the name of saving the free market, of course, by undermining it just this one time. Now the latest bailout threat involves not a too-big-to-fail private company, but a federal agency set up to support a favorite union institution: defined benefit pensions.

The Pension Benefit Guaranty Corporation (PBGC), the federal agency that insures private sector defined benefit pensions, is facing an enormous deficit that threatens to render it inoperable, as it would not be able to take over any more cancelled pension plans. The PBGC is supposed to be financed through premiums paid by insured companies, but that’s never stopped politicians from throwing money at their supporters’ priorities — in this case unions.  > Read more at

>Interview Ivan Osorio

> Keep up with all labor union news at


EPA’s Carbon Pollution Standard — One Step Closer to Policy Disaster
What the proposal is really telling the electric utility industry is this: If you want to build a new coal-fired power plant, you’ll have to build a natural gas combined cycle plant instead. Not surprising given President Obama’s longstanding ambition to “bankrupt” anyone who builds a new coal power plant. > View the full commentary at

 Supreme Court Limits Arizona’s Anti-Immigration Law


The Supreme Court has struck down portions of Arizona’s SB 1070 – the controversial immigration law that targets undocumented migrant workers. The Court ruled that federal law preempted sections that allowed for arrests without warrants, required immigrants to carry “alien registration documents,” and made it a criminal offense for undocumented workers to work or solicit work.

Even though the Court upheld a section that requires police officers to check immigration status, these significant revisions are still a modest victory for free market immigration reformers. The ruling restricts state attempts to create further punishments for peaceful migrants who seek work from American employers. Unfortunately, the law will continue to limit American citizens’ freedom of association by criminalizing those who “employ, harbor, or transport” unauthorized workers.  > Read the full commentary on

> Interview David Bier



CEI is a non-profit, non-partisan public policy group dedicated to the principles of free enterprise and limited government.  For more information about CEI, please visit our website,, and blogs, and  Follow CEI on Twitter!


CEI Today: Pension bailouts, court ruling on EPA regs, and a RAISE Act defeat

PENSION BAILOUT IN HIGHWAY BILL - IVAN OSORIO Highway Bill Would Continue Pension Underfunding Shell Game

The Highway Bill threatens to make a bad problem worse. Section 40312 of the Highway Bill — which amends the Employee Retirement Income Security Act (ERISA), the law that regulates private sector pensions — would further remove pension investment return projections even further from reality, by expanding the range of allowable projection figures so broadly as to make them meaningless. > Read more at

>Interview Ivan Osorio

> Keep up with all labor union news at


COURT RULING ON EPA GREENHOUSE GAS REGS - MARLO LEWIS Reflections on the D.C. Circuit Court GHG Decision


With the case law on GHG regulation hopelessly botched by the Supreme Court, only Congress can rein in the EPA — and only if there is a change of management in the White House and the Senate in November. > View the full commentary at



Washington Examiner:
 Why unions don't want workers to earn more


​During the recent debate on the farm bill, the Senate voted down an amendment that would allow unionized employers to give workers raises based on merit. The amendment, called the Rewarding Achievement and Incentivizing Successful Employees Act, eliminates the federally mandated ceiling on the union wages for nearly 8 million workers. > Read the full commentary on

> Interview the authors



CEI is a non-profit, non-partisan public policy group dedicated to the principles of free enterprise and limited government.  For more information about CEI, please visit our website,, and blogs, and  Follow CEI on Twitter!


CEI - Future of Video Forecast: Sunny, With a Chance of Regulation

Hearing an Opportunity to Explore Regulatory Modernization

Washington, D.C., June 26, 2012 -- Tomorrow morning, the U.S. House of Representatives Energy & Commerce Subcommittee on Communications and Technology will hold a hearing on “The Future of Video,” where leading media executives and scholars will testify on the subject of modernizing America’s video regulatory regime.

The following statement may be attributed to Ryan Radia, Associate Director of the Center for Technology & Innovation at the Competitive Enterprise Institute:

Government’s hands have been all over the video market since its inception, primarily in the form of the FCC’s rulemaking and enforcement enabled by the Communications Act. While the 1996 Telecommunications Act scrapped some obsolete television regulations, volumes of outdated rules remain law, and the FCC wields vast and largely unchecked authority to regulate video providers of all shapes and sizes. Tomorrow’s hearing offers members an excellent opportunity to question each and every law that enables governmental intervention and restricts liberty in the television market.

It’s high time for Congress to free up America’s video marketplace and unleash the forces of innovation. Internet entrepreneurs should be free to experiment with novel approaches to creating, distributing, and monetizing video content without fear of FCC regulatory intervention. At the same time, established media businesses -- including cable operators, satellite providers, telecom companies, broadcast networks and affiliates, and studios -- should compete on a level playing field, free from both federal mandates and special regulatory treatment.

The Committee should closely examine the Communications and Copyright Acts, and rewrite or repeal outright provisions of law that inhibit a free video marketplace. The Committee should, among other reforms, consider:

• Restoring traditional copyright protection to broadcast signals, instead of the compulsory license created by the 1976 Copyright Act;

• Abolishing the “must-carry” rule that requires pay-TV providers to transmit certain broadcast signals without compensation;

• Ending syndication exclusivity, network non-duplication, and sports blackout rules;

• Repealing programming availability mandates and set-top box regulation;

• Undoing broadcast/cable ownership restrictions and media cross-ownership rules;

• Eliminating program access rules;

• Stripping the FCC of the authority to intervene in and promulgate rules regarding retransmission negotiations;

• Ending special regulatory treatment for public, educational, and governmental channels.

The Competitive Enterprise Institute looks forward to working with members of the Committee to achieve real reform and ensure that the future of video is bounded only by the dreams of entrepreneurs.


CEI is a nonprofit, nonpartisan public interest group that studies the intersection of regulation, risk, and markets. For more about CEI, visit