Tag: news

According to
The Daily Beast, the State and Treasury departments are
investigating whether former NBA player Dennis Rodman broke the law
when he gave Kim Jong-un and his wife gifts on his recent trip to
North Korea.

From
The Hill:

The State and Treasury departments are investigating whether
Dennis Rodman broke the law on his most recent trip to North
Korea, The Daily Beast reports.

The former basketball star reportedly offered luxury gifts to
North Korean dictator Kim Jong-un for his 31st birthday, including
expensive whiskey and a fur coat for his wife. The gifts would
violate the 2010 International Emergency Economic Powers Act, as
well as several United Nations sanctions.

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24/7.

Spice up your blog or Website with Reason 24/7 news and
Reason articles. You can get the widgets
here. If you have a story that would be of
interest to Reason’s readers please let us know by emailing the
24/7 crew at 24_7@reason.com, or tweet us stories
at @reason247.

According to
The Daily Beast, the State and Treasury departments are
investigating whether former NBA player Dennis Rodman broke the law
when he gave Kim Jong-un and his wife gifts on his recent trip to
North Korea.

From
The Hill:

The State and Treasury departments are investigating whether
Dennis Rodman broke the law on his most recent trip to North
Korea, The Daily Beast reports.

The former basketball star reportedly offered luxury gifts to
North Korean dictator Kim Jong-un for his 31st birthday, including
expensive whiskey and a fur coat for his wife. The gifts would
violate the 2010 International Emergency Economic Powers Act, as
well as several United Nations sanctions.

Follow this story and more at Reason
24/7.

Spice up your blog or Website with Reason 24/7 news and
Reason articles. You can get the widgets
here. If you have a story that would be of
interest to Reason’s readers please let us know by emailing the
24/7 crew at 24_7@reason.com, or tweet us stories
at @reason247.

Yesterday Attorney General Eric Holder
said the Obama administration will offer guidance “very soon”
to banks that are leery of dealing with state-licensed marijuana
businesses because they worry about attracting unwelcome attention
from federal regulators and prosecutors. Because marijuana is still
prohibited by federal law, simply accepting deposits from
cannabusinesses could be viewed as money laundering or aiding and
abetting drug trafficking. That risk has made it difficult
for state-legal marijuana suppliers to arrange banking services, so
they often deal exclusively in cash, which makes their businesses
vulnerable to theft and hard for the government to monitor.

“You don’t want just huge amounts of cash in these places,”
Holder said during an appearance at the University of Virginia.
“They want to be able to use the banking system. There’s a
public safety component to this. Huge amounts of cash, substantial
amounts of cash just kind of lying around with no place for it to
be appropriately deposited, is something that would worry me, just
from a law enforcement perspective.”

Brian Smith, spokesman for the Washington State Liquor Control
Board, which will regulate the marijuana stores that are expected
to start opening in that state this summer, agrees that all that
cash is “a problem for everyone involved.” The “smoothest way” to
deal with it, he says, would be legislation passed by Congress, but
he rates the chances of that happening as “slim to none.” He hopes
a policy statement from the administration will avoid the prospect
of marijuana retailers delivering their taxes in armored
trucks.

During testimony before the Senate Judiciary Committee in
September, Deputy Attorney General James Cole
said Justice and Treasury Department officials were conferring
about how to address the marijuana banking problem. Yesterday
Holder reiterated that “we’re in the process now of working with
our colleagues at the Treasury Department to come up with
regulations that will deal with this issue.” It is not clear how
those regulations will work or how, in the absence of new federal
legislation, the Justice Department can assure banks that they
won’t be prosecuted for serving businesses that federal law
classifies as criminal enterprises. “The rules are not expected to
give banks a green light to accept deposits and provide other
services,” The New York Times
reports, “but would tell prosecutors not to prioritize cases
involving legal marijuana businesses that use banks.”

That is similar to the
approach the administration has said it will take with
cannabusinesses that comply with state law in Washington, Colorado,
and the 18 states that allow medical but not recreational use. The
policy, described in an August 29
memo from Cole, makes no promises, leaves
a lot of leeway for federal intervention, and can change at any
moment. Will the yellow light that reassured plucky marijuana
entrepreneurs make banks comfortable enough to welcome the business
of federal felons? 

“We’ll see something like the August 29 memo but from [Treasury
Secretary] Jack Lew and and Holder,” says Alison Holcomb, the ACLU
lawyer who ran Washington’s legalization campaign. “They may
include specific steps [indicating] what [they’ll] do if [they]
think there’s a problem to give banks that extra assurance. Sort of
like the DEA letters to [dispensary] landlords: We’re going to fire
a shot over your bow before we do anything. They may have to go
that far to reassure larger banks. But Bank of America has already
agreed that it’s going to hold the marijuana excise tax fund here
in Washington. That’s a step removed, but it’s still marijuana
activity. I think the banks are ready, or at least a sufficient
number [are ready], to provide services. We just need some piece of
paper that they can point to.”

Yesterday Attorney General Eric Holder
said the Obama administration will offer guidance “very soon”
to banks that are leery of dealing with state-licensed marijuana
businesses because they worry about attracting unwelcome attention
from federal regulators and prosecutors. Because marijuana is still
prohibited by federal law, simply accepting deposits from
cannabusinesses could be viewed as money laundering or aiding and
abetting drug trafficking. That risk has made it difficult
for state-legal marijuana suppliers to arrange banking services, so
they often deal exclusively in cash, which makes their businesses
vulnerable to theft and hard for the government to monitor.

“You don’t want just huge amounts of cash in these places,”
Holder said during an appearance at the University of Virginia.
“They want to be able to use the banking system. There’s a
public safety component to this. Huge amounts of cash, substantial
amounts of cash just kind of lying around with no place for it to
be appropriately deposited, is something that would worry me, just
from a law enforcement perspective.”

Brian Smith, spokesman for the Washington State Liquor Control
Board, which will regulate the marijuana stores that are expected
to start opening in that state this summer, agrees that all that
cash is “a problem for everyone involved.” The “smoothest way” to
deal with it, he says, would be legislation passed by Congress, but
he rates the chances of that happening as “slim to none.” He hopes
a policy statement from the administration will avoid the prospect
of marijuana retailers delivering their taxes in armored
trucks.

During testimony before the Senate Judiciary Committee in
September, Deputy Attorney General James Cole
said Justice and Treasury Department officials were conferring
about how to address the marijuana banking problem. Yesterday
Holder reiterated that “we’re in the process now of working with
our colleagues at the Treasury Department to come up with
regulations that will deal with this issue.” It is not clear how
those regulations will work or how, in the absence of new federal
legislation, the Justice Department can assure banks that they
won’t be prosecuted for serving businesses that federal law
classifies as criminal enterprises. “The rules are not expected to
give banks a green light to accept deposits and provide other
services,” The New York Times
reports, “but would tell prosecutors not to prioritize cases
involving legal marijuana businesses that use banks.”

That is similar to the
approach the administration has said it will take with
cannabusinesses that comply with state law in Washington, Colorado,
and the 18 states that allow medical but not recreational use. The
policy, described in an August 29
memo from Cole, makes no promises, leaves
a lot of leeway for federal intervention, and can change at any
moment. Will the yellow light that reassured plucky marijuana
entrepreneurs make banks comfortable enough to welcome the business
of federal felons? 

“We’ll see something like the August 29 memo but from [Treasury
Secretary] Jack Lew and and Holder,” says Alison Holcomb, the ACLU
lawyer who ran Washington’s legalization campaign. “They may
include specific steps [indicating] what [they’ll] do if [they]
think there’s a problem to give banks that extra assurance. Sort of
like the DEA letters to [dispensary] landlords: We’re going to fire
a shot over your bow before we do anything. They may have to go
that far to reassure larger banks. But Bank of America has already
agreed that it’s going to hold the marijuana excise tax fund here
in Washington. That’s a step removed, but it’s still marijuana
activity. I think the banks are ready, or at least a sufficient
number [are ready], to provide services. We just need some piece of
paper that they can point to.”

For all the talk about growing income
inequality, it turns out that a far more important issue – the
ability of individuals to move up the economic ladder – has
“remained remarkably stable over the second half of the twentieth
century in the United States.” This is self-evidently good news in
an economy that is dominated by bad news.

As the Washington Post
puts it

Children growing up in America today are just as likely — no
more, no less — to climb the economic ladder as children born more
than a half-century ago, a team of economists reported
Thursday.

That’s according to Harvard’s Raj Chetty and others, whose work
is often used to bolster arguments that economic prospects are
worse for people today than they were a generation or two ago.
The
paper is online here. While noting large variations in mobility
based on geographic location and other factors, they conclude
“a child born in the bottom fifth of the income distribution
has a 7.8% chance of reaching the top fifth in
the U.S. as a whole.” They also note that “the
strongest predictors of upward mobility are measures of family
structure such as the fraction of single parents
in the area.”

Here’s a chart laying out the odds of kids born in the
lowest, middle, and top income quintiles of reaching (or staying
at) at the top. The watchword is constancy.

This latest data should be surprising only to those who
have ignored a steady stream of research that’s been showing the
same basic trend for a very long time (Matt Welch and I discussed
this topic in
The Declaration of Independents). For instance, former Pew and
Brookings scholar Scott Winship, now at the Manhattan Institute,
has found

that upward mobility from poverty to the middle
class rose from 51 percent to 57 percent between
the early-’60s cohorts and the early-’80s ones. Rather than assert
that mobility has increased, I want to simply say — at this stage
of my research (which is ongoing) — that it has not declined. If I
include households that reported negative or no income, the rise in
upward mobility I find is only from 51 percent to 53 percent, which
is not a statistically meaningful increase. But the data provide
absolutely no evidence that economic mobility declined, whereas the
president said it had fallen by ten percentage points.

Don’t expect the latest findings to make much of a dent in
public discussions of economic policy. President Obama will talk
about inequality as the defining issue of our time in his
State of the Union address, and he regularly conflates growing
inequality with reduced mobility. So do most observers, whether on
the right or the left. 

That’s because inequality is easy to grasp as a concept and
ostensibly easy to rememdy. You just have take some money from one
group and give it to another and the problem in solved, right?

A lot of Winship’s work is
gathered here. He is right, I think, to argue that “we should
wage a war on immobility instead of inequality” and that increasing
rates of mobility has in fact proven very difficult. 

Reason TV taked with him a year ago about why scholars and
pundits are slow to admit that mobility hasn’t declined over time
and the difficulties of increasing mobility rates for all
Americans.

For all the talk about growing income
inequality, it turns out that a far more important issue – the
ability of individuals to move up the economic ladder – has
“remained remarkably stable over the second half of the twentieth
century in the United States.” This is self-evidently good news in
an economy that is dominated by bad news.

As the Washington Post
puts it

Children growing up in America today are just as likely — no
more, no less — to climb the economic ladder as children born more
than a half-century ago, a team of economists reported
Thursday.

That’s according to Harvard’s Raj Chetty and others, whose work
is often used to bolster arguments that economic prospects are
worse for people today than they were a generation or two ago.
The
paper is online here. While noting large variations in mobility
based on geographic location and other factors, they conclude
“a child born in the bottom fifth of the income distribution
has a 7.8% chance of reaching the top fifth in
the U.S. as a whole.” They also note that “the
strongest predictors of upward mobility are measures of family
structure such as the fraction of single parents
in the area.”

Here’s a chart laying out the odds of kids born in the
lowest, middle, and top income quintiles of reaching (or staying
at) at the top. The watchword is constancy.

This latest data should be surprising only to those who
have ignored a steady stream of research that’s been showing the
same basic trend for a very long time (Matt Welch and I discussed
this topic in
The Declaration of Independents). For instance, former Pew and
Brookings scholar Scott Winship, now at the Manhattan Institute,
has found

that upward mobility from poverty to the middle
class rose from 51 percent to 57 percent between
the early-’60s cohorts and the early-’80s ones. Rather than assert
that mobility has increased, I want to simply say — at this stage
of my research (which is ongoing) — that it has not declined. If I
include households that reported negative or no income, the rise in
upward mobility I find is only from 51 percent to 53 percent, which
is not a statistically meaningful increase. But the data provide
absolutely no evidence that economic mobility declined, whereas the
president said it had fallen by ten percentage points.

Don’t expect the latest findings to make much of a dent in
public discussions of economic policy. President Obama will talk
about inequality as the defining issue of our time in his
State of the Union address, and he regularly conflates growing
inequality with reduced mobility. So do most observers, whether on
the right or the left. 

That’s because inequality is easy to grasp as a concept and
ostensibly easy to rememdy. You just have take some money from one
group and give it to another and the problem in solved, right?

A lot of Winship’s work is
gathered here. He is right, I think, to argue that “we should
wage a war on immobility instead of inequality” and that increasing
rates of mobility has in fact proven very difficult. 

Reason TV taked with him a year ago about why scholars and
pundits are slow to admit that mobility hasn’t declined over time
and the difficulties of increasing mobility rates for all
Americans.

In recent weeks, health
insurers have sounded less than enthusiastic about Obamacare. At a
health industry investor’s conference last week, the head of Cigna
warned
that his company might take a loss on plans sold in Obamacare
exchanges. In an SEC filing, Humana said that the
demographic mix in the company’s exchange plans was “more adverse”
than expected. The CEO
of Aetna told CNBC this week that so far, the exchange plans
his company has offered in the exchanges have not successfully
attracted the previously uninsured—setting up the possibility that
Aetna might eventually pull out of the exchanges. And on Wednesday,
credit rating agency Moody’s
downgraded health insurers, projecting that earnings would be
less than expected in 2014 as a result of the “ongoing unstable and
evolving environment” surrounding the rollout of the health
law.

Insurers may be down on the law. But they’re not quite ready to
bail. For one thing, they’ve spent years reorganizing segments of
their businesses around its requirements. And for another, the law
provides a backstop to cushion the blow. If costs are significantly
lower than insurer targets, the federal government will share the
financial pain by reimbursing them for a percentage of their
losses.

In other words, taxpayers will be on the hook for unexpected
insurer costs—and the greater those unplanned insurer costs are,
the bigger the taxpayer share of the tab will be.

Insurers will be reimbursed for high expenses through
Obamacare’s risk corridors, one of several provisions in the law
intended to mitigate the risk to health plans participating in the
exchanges. The way that the risk corridors work is that for any
insurer spending between 3 and 8 percent above an insurer’s target
level, the Department of Health and Human Services will reimburse
them for 50 percent of the losses. For any spending that goes over
the 8 percent threshold, the federal government pays 80 percent.
This illustration from the American Academy of Actuaries provides a
helpful way of visualizing how the program, which is active from
2014 to 2016, works:

As the graphic shows, the backstop is symmetrical. Just as
insurers are covered in the case of greater than expected spending,
they are also required to pay out if spending is significantly
below target. But given the gloomy financial outlook for insurers
offering plans on the exchanges, the widespread expectation is that
the federal government will do all the paying out this year—and
insurers will not pay into the system at all.

That’s not what was advertised. As Wake Forest Law professor
Mark Hall noted
in a 2010 Health Affairs paper on Obamacare’s risk
provisions, the law was written under the assumption that payments
to and from the government would balance out. Some insurers would
spend more than expected; others would spend less. The program
would be revenue neutral, or close enough.

At this point, we can be pretty sure that won’t be the case.
What we don’t know, however, is how the government’s share of
insurer costs will be funded. As Hall noted, and as influential
health law professor Timothy Jost also pointed out in a
separate Health Affairs piece, the law makes no
mention of what to do if the cost to the government is more than
the amount paid in. Given that estimates suggest the payout to
insurers could be worth several billion dollars this year, and that
the potential costs are not capped at all, that’s not a
small matter.

That liability makes for a pretty big political target.

Sen. Marco Rubio (R-Fl.) has already
dubbed the program an insurer bailout, and proposed legislation
ending the program. This sparked a debate about whether the program
is or is not a bailout, with some vocal
opponents of the law
objecting to the description.

Their argument, broadly speaking, is that it’s not really a
bailout because it wasn’t tacked on after the fact to cover
irresponsible corporate behavior. This strikes me as a semantic
quibble, especially since the provision was essentially repurposed
long after it was passed—transformed from the revenue-neutral risk
sharing program that was originally envisioned into a mechanism for
the federal government to pay off insurers who are taking a
financial hit by participating in the administration’s signature
law. And it’s a mechanism that the administration has
proposed expanding in response to the messy rollout of that
law, potentially putting taxpayers on the hook for even greater
costs.

Does it really matter what word is used to describe it? Call it
a bailout, call it corporate welfare, call it a federal insurance
company subsidy made necessary by the administration’s poorly
designed and implemented law—what matters is that it’s a provision
from an unpopular law that puts taxpayers on the hook for the
health insurance industry’s bottom line. No matter what you call
it, it’s an ugly giveaway to insurers that wasn’t initially sold as
such.

It’s also a provision that the administration believes is
necessary for the survival of the law, and the health insurance
industry it regulates. In its
justification for awarding a rapid no-bid contract to
Accenture, the tech firm brought in to work on the federal exchange
system after last year’s disastrous launch, the federal government
explained that it needs the financial management system that’s
supposed to make the risk corridor payments to be completed by
mid-March of 2014. Without that system in place, the administration
might end up inaccurately forecasting risk corridor payments,
“potentially putting the entire health insurance industry at risk.”
That risk, the administration said, put the “entire healthcare
reform program” in jeopardy.

Bailout or no, then, at this point it’s almost moot: The
financial backend for making the risk corridor payments, a system
the administration claims to believe is absolutely necessary to the
law’s success, hasn’t even been built yet—and the
administration just switched tech contractors in a panic after the
last one utterly failed to deliver. That’s the level of competence
that’s gone into implementing this law so far. Will the late-game
lineup change put the system on better footing? If not, this
bailout may need a bailout.