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Roberts' Supreme Court Overstepped Its Bounds, Again

FORECASTS & TRENDS E-LETTER
by Gary D. Halbert
June 30, 2015

IN THIS ISSUE:

1.  1Q GDP Revised From Negative 0.7% to Negative 0.2%

2.  Current Recovery is Worst Since 1960, So Get Rid of GDP

3.  May Consumer Spending Rose the Most in Almost Six Years

4.  The Roberts’ Supreme Court Overstepped Its Bounds, Again

5.  Justice Antonin Scalia Blasts Court’s  “SCOTUScare” Ruling

6.  Justice Antonin Scalia: America’s ‘Ruler’ is Supreme Court

Overview

Last week the Supreme Court rendered two controversial landmark decisions, one on Obamacare subsidies and another on same-sex marriage. Both went in favor of the liberals on the Court, and many conservatives cried foul.

While neither decision came as a surprise to me, Supreme Court observers on both the right and the left were surprised by the way the court went about making them. In both cases, there was a great deal of liberal “interpretation” of the law, and in the same-sex marriage case, states’ rights were trampled.

Today, I will share a few of my thoughts on the landmark decisions last week. More importantly, I will share with you summaries of the “dissents” written by conservative Justice Antonin Scalia, one of my long-time favorites on the Court. He had some powerful thoughts on last week’s decisions that I think you will appreciate.

There was one other troubling Supreme Court decision last week that you probably didn’t hear about, but you should have. The ruling cracks down on housing discrimination, which sounds like a good thing. Yet this decision could lead to a new housing bubble and the next financial crisis, so you need to know about it. This story appears as the first link in SPECIAL ARTICLES.

Before we jump into the Supreme Court discussion, let’s take a look at a couple of important economic reports released over the last week.

1Q GDP Revised From to Negative 0.7% to Negative 0.2%

Last Wednesday, the Commerce Department released its third estimate of 1Q GDP. The latest estimate for the January-March quarter was -0.2% (annual rate), slightly better than its second estimate of -0.7% last month.

United States GDP Growth Rate

With more complete data this month, the government said that exports decreased less than previously estimated, and consumer spending increased more than reported last month. There were also positive contributions from inventory investment and housing.

While -0.2% represents an improvement over the previous estimate, a familiar pattern continues in the current expansion, in which several quarters of impressive growth are upended by a significant slowdown. The latest reading marks the fifth time in the six-year old recovery when the economy failed to achieve at least a 1% growth rate for a quarter.

Most forecasters still expect a significant improvement in the economy in the 2Q; however anecdotal evidence in recent weeks suggests that the rebound may not be as strong as many have been suggesting. We don’t get our first estimate of 2Q GDP until the end of July.

Current Recovery is Worst Since 1960: Push to Scrap GDP

Next, you should know that there is growing evidence of a strong push by the Obama administration, and its willful accomplices in the media, to get rid of GDP as the bellwether indicator of the economy. It is true that GDP, as currently measured, is lacking in a number of areas and fails to capture everything that is produced in our economy. Yet Gross Domestic Product is still the best indicator we have of the strength or weakness in the economy.

The weakness in GDP so far in 2015 merely extends the dismal track record of the 23-quarter post-Great Recession recovery. The annualized growth rate from 2008 to 2014 of just 1.13% is dead last compared to the six other post-recession recoveries since 1960, which averaged 3.97% after 23 quarters.

This is making President Obama and his policies look very bad, and he doesn’t want that fact to be his legacy. No wonder they want to get rid of GDP and replace it with some other measurement that looks better. You’ll be hearing more about this in the weeks and months just ahead.

Consumer Spending Rose the Most in Almost Six Years

On a brighter note, household spending climbed in May by the most in almost six years, buoyed by gains in incomes as the US job market strengthened. Consumer spending increased 0.9% (annual rate) last month, the biggest gain since August 2009, after rising by only 0.1% in April, Commerce Department figures showed last Thursday.

The median forecast of 75 economists in a Bloomberg pre-report survey called for a 0.7% increase, so the report was better than expected. Incomes rose 0.5% for a second month. The better than expected boost in spending and income in May gave forecasters some renewed optimism that the economy may rebound in the 2Q.

Personal Consumption

Spending on durable goods, including automobiles, increased 2.3% in May, following a 0.1% drop in April, Thursday’s data showed. Purchases of non-durable goods, which include gasoline, rose 0.9%, while outlays on services climbed 0.2%.

Auto sales have been boosting the spending figures, with cheap financing helping to spur Americans’ appetites for vehicles. Industry data from Ward’s Automotive Group issued earlier this month showed cars and light trucks sold at a 17.7 million annualized rate in May, the strongest pace since July 2005.

Let’s hope this good news continues. Now let’s move on to our main topic today, the latest Supreme Court decisions.

The Roberts’ Supreme Court Overstepped Its Bounds, Again

Like many conservatives, I disagreed with last week’s two landmark decisions by the Supreme Court. But more irritating than the decisions themselves was the way the High Court went about making them. In the Obamacare case, King v. Burwell, the challengers argued that it is unconstitutional for the federal government to provide health insurance subsidies to people who live in states that did not set up their own insurance exchanges.

The language in the Affordable Care Act specifically states that such subsidies are allowed only in exchanges “established by the State.” The defense argued that the phrase included the federal government and not just the individual states. Without these federal subsidies in states that do not have exchanges, Obamacare would not be able to survive.

For the second time in three years, Chief Justice John Roberts (a George W. Bush appointee) sided with the court’s liberals to uphold that key interpretation of Obamacare and saved it once again. Adding insult to injury for the right: Roberts again wrote the opinion for the majority, stressing that the intent – not the wording – of the law was more important. In other words, that was what the lawmakers in Congress meant to say, in his opinion.

But how does Chief Justice Roberts, or any of the other justices really know what Congress meant to say? They don’t but they ruled as they did anyway. How is this justice? It’s not.

Supreme Court of the United StatesNext, in the gay marriage decision, I was not totally surprised that the High Court ruled in favor of same-sex marriages. What bothered many conservatives most was the fact that, before this ruling, 37 states already had some kind of law making gay marriage legal. This had always been an issue for the states to decide, and many believe it still should be. Even Chief Justice Roberts agreed and voted against this ruling.

In an unexpected interpretation, the majority decided that certain language in the 14th Amendment provides the right for same-sex couples to get married. No court has interpreted it that way before, but in this case, the majority (5-4) said, in its opinion, that it does:

“The limitation of marriage to opposite-sex couples may long have seemed natural and just, but its inconsistency with the central meaning of the fundamental right to marry is now manifest.”

In conclusion, last week’s landmark decisions on Obamacare subsidies and same-sex marriage raise some troubling questions:

Can the nine justices who sit on our nation’s highest court simply mandate that such contentious topics as healthcare subsidies and gay marriage are now “resolved” and not subject to further legal challenges?

Can a majority of five justices decide what Congress really meant, rather than what its laws actually state? Can they trample states’ rights and rewrite traditions dating back hundreds of years with a few strokes of their mighty pens?

Apparently, a majority of the Court now believes the answer to these questions is YES.

I could write much more about the controversial Supreme Court decisions made this month, including one you probably didn’t hear about – that could lead to the next housing/financial crisis. I don’t have room to go into it in detail today, but be sure to read about it in the first link in SPECIAL ARTICLES below.

Rather than write more, I leave you with two summaries of Associate Justice Antonin Scalia’s dissents on the two SCOTUS (Supreme Court of the United States) decisions discussed above. Justice Scalia was appointed by President Ronald Reagan in 1986 and has long been one of my favorites. The two articles reprinted below appeared last week in The Hill.

Scalia  Blasts  ‘SCOTUScare’  Ruling
by Ben Kamisar & Lydia Wheeler, The Hill

Justice Antonin Scalia has coined a new nickname for the Affordable Care Act after the Supreme Court ruled once again to save the law: SCOTUScare.

The Honorable Antonin Scalia“We should start calling this law SCOTUScare,” he wrote in his dissenting opinion, which was joined by Justices Samuel Alito and Clarence Thomas, a play on the law’s other nickname, ObamaCare.

“The cases will publish forever the discouraging truth that the Supreme Court of the United States favors some laws over others, and is prepared to do whatever it takes to uphold and assist its favorites.”

Scalia delivered his blistering dissent as part of the 6-3 decision reached in King v. Burwell, which upholds the federal government’s ability to provide subsidies for 6.4 million people in states that chose not to set up healthcare exchanges.

The legal challenge, bolstered by conservative lawmakers and think tanks, argued that expanding those subsidies to federally-run exchanges was an overly expansive reading of the law, relying on a phrase that called for subsidies only in markets “established by the State.”

In the majority opinion, Chief Justice John Roberts swatted that argument down and said that it is “implausible that Congress meant the Act to operate in that matter.”

Scalia disagreed strongly, arguing that the language clearly prohibited the subsidies. He called the majority’s argument “interpretive jiggery-pokery” that establishes a dangerous precedent.

“Words no longer have meaning if an Exchange that is not established by a State is ‘established by the State,’” he wrote.

"You would think the answer be obvious — so obvious there would hardly be a need for the Supreme Court to hear a case about it. …The Secretary of Health and Human Services is not a state.”

In delivering his opinion from the bench on Thursday, Scalia noted that the phrase “established by the State” appears in seven provisions of the healthcare law related to tax credits.

“What are the odds that the same slip of the pen occurred in seven separate places?” he asked. “If there were a mistake here, context suggests that it was a substantive mistake in designing part of the law, not a technical mistake in transcribing it.”

He said it’s Congress's responsibility to make laws and the court’s responsibility to interpret them.

“It is up to our country's elected lawmakers, not to its unelected judges, to repair statutes that have unintended consequences or that do not work out in practice.”

Scalia ended his dissent with a tacit rebuke… Justices typically sign a dissent by including the term “respectfully” — even Scalia’s 2012 scathing ObamaCare dissent ends by stating, “We respectfully dissent.”

But in a move perhaps indicative of his feelings on the majority opinion, he simply ends his opinion in King v. Burwell with, “I dissent.”

Scalia: America’s ‘Ruler’ is Supreme Court
by Ben Kamisar, The Hill

Justice Antonin Scalia is chastising the Supreme Court’s landmark decision legalizing same-sex marriage on Friday as an affront to the principle of democratic rule.

Scalia argues in his opinion that the court is increasingly creating policy rather than serving as a neutral arbiter.

“Today’s decree says that my Ruler, and the Ruler of 320 million Americans coast-to-coast, is a majority of the nine lawyers on the Supreme Court,” he writes.

“This practice of constitutional revision by an unelected committee of nine, always accompanied (as it is today) by extravagant praise of liberty, robs the People of the most important liberty they asserted in the Declaration of Independence and won in the Revolution of 1776: the freedom to govern themselves.”

Scalia blasts the majority opinion as “couched in a style that is as pretentious as its content is egotistic.”

“The Supreme Court of the United States has descended from the disciplined legal reasoning of John Marshall and Joseph Story to the mystical aphorisms of the fortune cookie,” he writes in a footnote needling the majority for its bombastic language. 

It’s the second day in a row that Scalia has blasted the majority’s opinion. On Thursday, he accused the court of creating “SCOTUScare” with a ruling that said the federal government could provide ObamaCare subsidies to consumers on a federal exchange.

Chief Justice John Roberts wrote that decision and was at the end of Scalia’s criticism, but on Friday they were on the same side.

Scalia wrote his own dissent even though he wrote that he agrees with everything that Roberts wrote in his own dissenting opinion, in order to “call attention to this court’s threat to American democracy.”

Scalia admits that the societal outcome of the decision isn’t particularly important to him.

“The law can recognize as marriage whatever sexual attachments and living arrangements it wishes, and can afford them favorable civil consequences,” he writes.

But he wrote that he views the opinion as an overreach by the court, and chides the justices as “hardly a cross-section of America.”

He notes that all the justices graduated from Harvard or Yale Law School, eight grew up on the coasts, and that not one is an evangelical Christian or a Protestant, religions that make up significant chunks of the American population. 

“To allow the policy question of same-sex marriage to be considered and resolved by a select, patrician, highly unrepresentative panel of nine is to violate a principle even more fundamental than no taxation without representation: no social transformation without representation,” he writes.

END QUOTE 

Very best regards,

Gary D. Halbert

 

SPECIAL ARTICLES

Supreme Court decision that could lead to the next housing/financial crisis

Kudlow: Worse Than the Supremes: Obamacare Economics

Current Recovery Worst Since 1960: Obama Push to Scrap GDP

 


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Forecasts & Trends E-Letter is published by ProFutures, Inc. Gary D. Halbert is the president and CEO of ProFutures, Inc. and is the editor of this publication. Information contained herein is taken from sources believed to be reliable but cannot be guaranteed as to its accuracy. Opinions and recommendations herein generally reflect the judgement of Gary D. Halbert (or another named author) and may change at any time without written notice. Market opinions contained herein are intended as general observations and are not intended as specific investment advice. Readers are urged to check with their investment counselors before making any investment decisions. This electronic newsletter does not constitute an offer of sale of any securities. Gary D. Halbert, ProFutures, Inc., and its affiliated companies, its officers, directors and/or employees may or may not have investments in markets or programs mentioned herein. Past results are not necessarily indicative of future results. Reprinting for family or friends is allowed with proper credit. However, republishing (written or electronically) in its entirety or through the use of extensive quotes is prohibited without prior written consent.

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