Libertarians Think They’ve Found a Smoking Gun in the Halbig Case

Reporting on Politics and Policy.
July 25 2014 9:13 AM

Libertarians Think They’ve Found a Smoking Gun in the Halbig Case

Last night I joined the cheerful libertarians of the Competitive Enterprise Institute for a celebration of the D.C. Circuit's Halbig decision, gathering string for a piece about where the movement goes from here. In a short speech, the Cato Institute's Michael Cannon—basically the Professor X of the case—recalled how he could not figure out who had standing to sue the government over the ACA's mandate and subsidy regime, until he was bored and checking email (at a congressional hearing) and some dude emailed him a thought. What about an average citizen, who would be forced to buy health care if the subsidies went into place? Wouldn't he or she have standing?

"I thought, 'Who are you?' " remembered Cannon. "And why are you so much better at my job than me?"

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Hours earlier, another random American had just given Cannon—and Halbig supporters—a fabulous gift. At 11:44 a.m. Eastern, a commenter on Jonathan Adler's blog post about the case (Adler, a blogger at the libertarian Volokh Conspiracy, is the key attorney in Halbig) pointed to an unnoticed 2012 speech by Romneycare architecht Jonathan Gruber. Asked "bostonbakedbeans":

How about the understanding of one of the key architects, Jonathan Gruber, of the PPACA from January 2012 (jump to 31m30s): https://m.youtube.com/watch?v=GtnEmPXEpr0 ? Here he outlines why the Federal exchanges were holding back -- and specifically that the intent was to put pressure on the states to enact because any state under a Federal exchange doesn't get tax credits for its residents.

The exact same comment was reposted with the sleuth's actual name, Rich Weinstein. Hours later, CEI's Ryan Radia wrote a blog post about the video. By late Thursday night, the entire conservative/libertarian blogosphere/twittersphere was crowing about the video.

Here's what Gruber said, when asked whether the feds would create exchanges if recalcitrant states did not.

So these health-insurance Exchanges, you can go on ma.healthconnector.org and see ours in Massachusetts, will be these new shopping places and they’ll be the place that people go to get their subsidies for health insurance. In the law, it says if the states don’t provide them, the federal backstop will. The federal government has been sort of slow in putting out its backstop, I think partly because they want to sort of squeeze the states to do it. I think what’s important to remember politically about this, is if you’re a state and you don’t set up an Exchange, that means your citizens don’t get their tax credits. But your citizens still pay the taxes that support this bill. So you’re essentially saying to your citizens, you’re going to pay all the taxes to help all the other states in the country. I hope that’s a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these Exchanges, and that they’ll do it. But you know, once again, the politics can get ugly around this.

The timing of the speech is important. Gruber said this in January 2012. It wasn't until May 2012 that the IRS issued a rule, clarifying that subsidies would also be available to the states that joined the federal exchange. And it wasn't until July 2012 that Cannon and Adler published their paper making the argument that the language of the law forbade any such mulligan for states.

But this bolsters the libertarians' case. Gruber is acknowledged, by everyone, as an architect of the ACA. There is, to date, no evidence that he flogged the carrot/stick subsidies idea on Congress, and as Cannon writes in a piece at Forbes, Gruber has done hours of scoffing at the rationale behind Halbig. It just happens that in early 2012, when Cannon was barnstorming states to get them to avoid creating exchanges, Gruber was telling them they had better create exchanges or they wouldn't get subsidies.

David Weigel is a reporter for Bloomberg Politics

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