ObamaCare SCOTUS Update

The hatful of lawsuits challenging ObamaCare are likely to be heard before the Supreme Court of the United States during this session. All of the cases ask the Court to rule on whether the Commerce Clause of the Constitution allows Congress only to regulate commerce that is being committed, or if Congress can command commerce to be committed – the individual mandate question. US District Courts of Appeal have ruled both ways on this, so the Supreme Court is almost certain to grant certiorari on this aspect of ObamaCare.

This vital to the whole of ObamaCare, since without the individual mandate, forcing insurers to underwrite pre-existing conditions and removing caps on lifetime care will bankrupt the industry. Put simply, if the mandates can’t be enforced, the whole healthcare overhaul collapses.

There are also wider implications, because if Congress can construe the oversight of on-going commerce to include a mandate that every American commit commerce, there is no limit to what Congress can mandate. This is precisely the check on government power the Supreme Court was designed to perform. The 11th Circuit Court of Appeals found the individual mandate “breathtaking in its expansive scope … The government’s position amounts to an argument that the mere fact of an individual’s existence substantially affects interstate commerce, and therefore Congress may regulate them at every point in their life. This theory affords no limiting principles in which to confine Congress’s enumerated power.”

The National Federation of Independent Businesses, and other litigants argue that if the mandate is struck down, the entire Affordable Care Act is invalid. One of the examples of the slap-dash nature of the way in which this law was “crafted” is the absence of a severance clause – a boilerplate of legislative language that all bills include which states that “if any portion of this law is overturned or repealed, the remainder remains in full force and effect.” No such clause was included anywhere in the 2,000+ pages of ObamaCare, meaning that invalidating any of it invalidates all of it. The Supreme Court may well overlook this case of stare decisis in order to avoid chaos in Congress – or it may hold to tradition (and settled law). This could go either way, even with a 5-4 rejection of the mandate (which is not assured in any event).

An inside-baseball aspect is the 4th Circuit’s ruling that it lacked jurisdiction because the Anti-Injunction Act prevents anyone standing to challenge a tax before actually paying (referring to the penalty for not buying health insurance, which is not yet in-force). Both Liberty University and the Solicitor General are asking the Court to rule on this, but both are asking the Court to find that the AIA doesn’t apply in this case. Neither wants the “penalty” to be considered a tax – Liberty Union because Congress has the enumerated right to levy taxes, and the government because the Democrats proclaimed loudly and often that this was in no way a tax.

The Court will undoubtedly discuss this aspect, but could take one of three courses: it could rule that AIA doesn’t apply here, moving on to the greater challenges of the mandate; it could find that AIA does, in fact, apply, telling Liberty Union to come back after 2014 (when the penalty will be in force); or, it could choose not to hear this case at all.

Then there’s the Virginia Law. Just before President Obama signed the Affordable Care Act, Virginia passed a law making it illegal for anyone to require a Virginia resident to buy insurance. The state is arguing this case as a state’s rights issue. The Court will likely not review this aspect, since, once a Virginian refuses to buy insurance under ObamaCare (in 2014), the case will get thrown out in pre-trial motions as the US attorney will invoke the superiority of federal law over state law in cases of conflict between the two.

The group of 26 states is, in addition to challenging the mandate, is asking the Court to invalidate ObamaCare’s expansion of Medicaid to all non-Medicare recipients at or below 133% of the federal poverty level (it is currently 100%), or leave Medicaid, as commandeering the states to enforce federal law at the states’ expense. This may not be heard, or forthrightly upheld – states have unsuccessfully tried to challenge various aspects of Medicaid in the past.

The 26 states are joined by Liberty University in asking the Court to throw out the Employer Mandate, which requires businesses with more than 50 full-time workers to provide health coverage or pay a fine. Litigants say this interferes with the employer-employee relationship, which is private and a contractual arrangement. There is precedent for the Court regulating this relationship, and they are unlikely to address this issue except in passing.

Right now, I’m guessing that SCOTUS will strike down the individual mandate as extraconstitutional; will not rule on the severance issue (thereby allowing the rest of ObamaCare to legally stand, if without half of its funding); will dismiss (in the opinion, if not in an actual ruling) the Virginia law; will uphold the Medicaid provision and will not address the employer mandate. That’s my call before hearing the oral arguments.

Time to put the Hard Hat on Again

According to NASA, another satellite will re-enter the Earth’s atmosphere next week. This time, it’s the 2.4 ton defunct German Aerospace Center X-ray telescope ROSAT[1]. It will contact the atmosphere sometime between October 21 and October 23, and probably won’t complete an entire orbit before impacting the Earth’s surface.

Like last month’s UARS satellite-plunge, ROSAT will break-up in the upper atmosphere and, largely, burn up as it passes through, although pieces as heavy as ~400 kilograms (~880 pounds) could survive to impact the surface.

ROSAT was lifted into orbit on 1 June 1990 aboard a Delta II Heavy Lift Vehicle for an 18-month mission to map X-Ray sources in the cosmos. In fact, it operated successfully until 12 February 1999, when it finally went dark and quiet. During that span, ROSAT mapped 110,000 stars, supernovae and X-Ray sources. Unlike satellites taken up by the Shuttle, ROSAT has no “kick motor”, a relatively weak rocket to take it from the Shuttle’s parking orbit to its higher, working orbit. The Delta lifted it directly to its working orbit. The fuel for ROSAT’s maneuvering reaction thrusters is spent. All this means that there is no way to stage its re-entry to put impact where we want it – it will come down where it comes down.

The German Aerospace Center puts the odds of its falling satellite’s parts hurting anyone on the planet at 1 in 2,000. But the odds of a specific person being hit by debris – say, you – are much higher, ~1 in 14 trillion. You’re odds are better for winning the lottery by buying one ticket one time.

So put your hard hat back on, and if you’re hit by ROSAT debris, buy that lottery ticket!

[1] ROSAT is short for entgensatellit, in German X-rays are called Röentgenstrahlen, in honor of their discoverer, Wilhelm Röentgen.

If Things Come in Threes …

You’ve heard it all your life … “good/bad things come in threes.” If that’s true, we could be in for a rough winter. There are, in fact, three situations coming to a head – the Eurozone financial crisis, a wholly new aspect to the Egyptian Spring, and a wholly new aspect to Iranian bellicosity. All three could have very serious impact on America, but if they produce at roughly the same time, they surely will.

Europe may no longer be able to save itself. Too many countries have too much debt. Its economic growth – which enables countries service their debts – is too feeble. And nervous financial markets seem increasingly prone to dump the bonds of vulnerable countries (leaving some of Europe’s largest banks holding the bag). This is the real risk to the global and US economic recoveries, far overshadowing Standard & Poor’s downgrade of US Treasury debt and general market volatility[1].

The internals of the European crisis are purely European: the two most likely solutions – the resurrection of the “German Problem,” and excommunicating Greece from the euro would collapse confidence in the currency and the Union that backs it. That having been said, the effects of failing to subdue the crisis will have repercussions well beyond Europe. The failures of large European banks (the French/Belgian Dexia Bank has already been taken over and broken up) will spill over into banks outside Europe, as the world’s large banks are intertwined through loans to each other and the exchange of securities. A failure of confidence in European banks would quickly lead to a crisis of confidence in Western banks. Investors begin pulling funds out of investments held by these institutions, banks stop lending to each other, and credit freezes again. This time, worldwide.

The cost of shoring up Europe in the medium term would take ~€2 trillion (~$2¾ trillion)[2]. Despite the fact that the cost to the globe of a European financial collapse would vastly outstrip this amount, interested parties from the IMF to the Chinese and even the Europeans themselves have not been able to materially abate the crisis. The reason is simple. All solutions to date have attempted to shuttle funds from healthier balance sheets onto the balance sheets of bankrupt lenders and countries on the verge of default. While this is was the promise of a common currency – a “one for all and all for one” sort of monetary collaboration – it was based on fiscal and political assumptions that were non-existent and unlikely to materialize. Cobbling together enough hard capital to tamp down this crisis will almost certainly prove politically and economically impossible.

A European failure will cost the Dow at least a third of its value, which will quell any thoughts of an American recovery.

Second, October 9 was the most violent day in Egypt since the fall of Mubarak and many Egyptians are now calling it “Black Sunday.” What began as a Coptic protest march from Northern Cairo to the state TV building (known as Maspero) devolved into a melee that led to the deaths of more than 20 people. Multiple military vehicles were set on fire, military issue armored personnel carriers were driven through crowds of people at high speeds and at some point someone from within the crowd fired upon a group of soldiers who were providing security outside of Maspero. This was the first time that any protester in Egypt has used a firearm against an Egyptian soldier since the demonstrations began in January, and marks a dramatic shift in tactics[3].

Like the Eurozone crisis, a lot of the back story here is peculiar to Egypt – the role of the military in Egyptian society, the relationship between the military and the Tahrir Square protesters, the role of, and questions about, the Muslim Brotherhood – but the uniqueness in this incident is the firing on soldiers from the crowd of demonstrators. It’s never happened before. To complicate matters, communication in and out of Cairo is sketchy at best, and the voracity of those reports is difficult to determine. One item heard from multiple sources, multiple times, is that it was not Coptic Christians who fired at Egyptian troops, but outside agitators (possibly foreign, possibly Muslim Brotherhood, possibly al Qaeda, possibly … you get the idea).

In doing assessments of countries, you’re consistently looking for tripwires that are crossed or anomalies which are outside the norm, and that has unfold here. The military has controlled Egypt since Colonel Nasser removed King Farouk in a 1956 coup, so if this is a new phase of the Egyptian Spring aimed at challenging the military, this may turn out to be a true revolution yet. That will almost assuredly turn out badly for Israel and the West, as whatever emerges will less interested in Egypt’s recent historical role of counterbalance in the region, and more interested in expressing a more fundamentalist face. The Muslim Brotherhood is going to try to coopt the movement – this was well known – but may find it easier if the military is compromised in the public’s eye.

A more Islamist Egypt will destabilize the region at a time when it can ill afford to lose stability, and will complete the circle of hostility around Israel, which could lead to a great deal of unpleasantness indeed.

And third, an elaborate Iranian-backed plot to assassinate the Saudi ambassador to the US, Adel Al-Jubeir, and to bomb Saudi and Israeli Embassies in Argentina and elsewhere, was disrupted by FBI and DEA agents, officials said Tuesday[4]. An Iranian-born American with dual citizenship, Manssor Arbabsiar, contacted who he thought was a representative of Los Zetas – the enforcement arm of the Juarez cartel – in a plot to assassinate the ambassador by bombing a Washington restaurant while he was there. In actuality, he had contacted an undercover operative of the DEA, and the plot was allowed to unfold until $50,000 was sent from Iran, cementing the deal, which would net the shooter $1.5 million upon completion of the hit. The controller was a high-ranking officer of the Quds force, a covert operations contingent of the Iranian Revolutionary Guard (military), and answers only to the ruling mullahs. Thus far, Iran has denied any connection with the man or the alleged plot.

This is significant for two reasons: it represents a direct Iranian strike on US soil; and, it sidesteps Hizbollah, their usual choice for such things, and was willing to deal with agents indigenous to the Americas[5]. This is a geometric, rather than incremental, increase in the intensity of Iranian foreign operations, and demonstrates a deepening sense of impunity regarding America’s political will to react to Iranian intransigence.

At best, Tehran just overreached and undertook a bridge too far by trying to assassinate a Saudi official in America (with indeterminate collateral damage); at worst, it was a dress rehearsal for placing and detonating a WMD in an American city. Either way, it speaks volumes as to the failure of American policy toward Iran, not begun by the Obama administration, but amplified by its belief that the regime had any taste for rapprochement with America or the West. Sanctions obviously aren’t working – this operation was attempted in the face of the full force of those currently in affect. Additional sanctions would seem to be repeating behavior, hoping for different results.

The puzzling aspect of this operation is why they would choose such an amateur to execute such a sensitive operation. Despite numerous trips to Iran, his abysmal tradecraft belies any training Quds force may have given him – and it they didn’t train him, why didn’t they? Why would Tehran agree to pay Los Zetas $1.5 million? There is no history of Iran working with drug cartels, except for operating and training in the Tri-Border. With Hizbollah assets in South America, why not use them? Remember, we have been in an unresolved state of war with Iran since the 1979 takeover of our embassy in Tehran, and before 9/11, Hizbollah killed more Americans than all other terrorist organizations combined.

Whether by miscalculation or as part of larger phenomenon, this escalation is a dangerous development in Iran’s behavior.

Taken separately, any of these situations presents serious considerations for an administration that seem ill-prepared for them; in rapid succession, they present foreign affairs crisis for the West, in general, and Washington, in particular.

[1] See Robert J Samuelson, The big danger is Europe, in Jewish World Review, August 9 2011.

[2] Spain, Italy, Portugal, Ireland (still) and even France, and their institutions, will need some sort of injection of funds.

[3] See Dispatch: A New Phase in Post-Mubarak Egypt, STRATFOR, October 10 2011, 1537EDT. The private intelligence organization is closely following this development in Cairo, and continues to send numerous dispatches daily.

[4] See Brian Bennett,US accuses Iran of plot to kill Saudi ambassador, in Los Angeles Times, October 11 2011.

[5] Even though Hizbollah has operatives at training camps in the Tri-Border Region, where Brazil, Uruguay and Argentina meet.