MARY REICHARD, HOST: It’s Monday, March 6th. Glad to have you along for today’s edition of The World and Everything in It. Good morning. I’m Mary Reichard.
NICK EICHER, HOST: And I’m Nick Eicher. It’s time for Legal Docket.
Last week, the Supreme Court heard arguments for and against President Biden’s plan to cancel student loans.
The high court also released two opinions. Let’s start with those.
One is a victory for a taxpayer given a fine of nearly three million dollars by the IRS for unintentionally failing to file certain forms.
Alexandru Bittner has dual citizenship with the U.S. and his native Romania. He ran several businesses in Romania after communism fell, and upon return to the U.S., Bittner learned of IRS forms he was supposed to have filed but hadn’t.
He took immediate action to try to make things right. But the IRS was not, let’s say, not satisfied that he’d complied with the Bank Secrecy Act.
REICHARD: “Not satisfied” is rather an understatement. The IRS calculated his penalties on a per-account basis that tacked on an additional two million dollars-plus from Bittner’s calculation that was based on a per-form basis.
But the high court ended up agreeing with Bittner. He’s not off the hook: He’ll still owe 50,000 dollars, but that’s a five-figure penalty instead of seven figures. Thousands, not millions.
EICHER: The second opinion is a huge loss for the state of Delaware in a dispute over unclaimed Moneygram funds.
MoneyGram’s a service that allows you to send or receive money for a fee.
And maybe it’s hard to believe there are unclaimed funds, but there’s hundreds of millions in unclaimed funds, and the state government of Delaware has claimed them.
Delaware’s legal theory was that Moneygram is incorporated in that state. But dozens of other states sued for a piece of that cash pie, and those states won, unanimously.
Now that unclaimed money will go to the state in which the MoneyGram was purchased.
REICHARD: That’s a big deal and Delaware’s budget is about to take a dive. Unclaimed property--can you believe it?--is Delaware’s third biggest revenue source!
Now for the oral arguments in the two cases with billions of taxpayer dollars at stake.
Here’s the background: ahead of the midterm election last year, the Biden administration announced it would cancel up to $10,000 in debt for student borrowers who earn less than $125,000 a year. For those who received Pell Grants, there was more relief available.
The president claims authority under the federal HEROES Act, the Higher Education Relief Opportunities for Students Act. Congress passed it early on in the Iraq war to suspend payments on student loans held by servicemembers.
EICHER: The idea had been kicked around for a while. But in 2021 Nancy Pelosi who was then Speaker of the House said this about loan forgiveness:
PELOSI: People think that the president of the United States has the power for debt forgiveness. He does not. He can postpone, he can delay, but he does not have that power. That has to be an act of Congress…President can’t do it. So that’s not even a discussion.
Pelosi changed her position from can’t do it to can do it and from no discussion to huge discussion.
So at the Supreme Court, six states and two individuals challenged the plan on grounds that the Biden administration overstepped its authority. That it misused the purpose of the HEROES Act. And that it didn’t follow proper regulatory procedures, such as notice and comment.
REICHARD: U.S. Solicitor General Elizabeth Prelogar defended the plan at oral argument. She will mention the term “forbearance.” And what that means is the pause on student loan payments and interest accrual that then-Education Secretary Betsy DeVos invoked under President Trump that President Biden extended.
PRELOGAR: COVID-19 is the most devastating pandemic in our nation’s history and over the past three years, millions of Americans have struggled to pay rent, utilities, food, and many have been unable to pay their debts. But if forbearance ends without further relief, it’s undisputed that defaults and delinquencies will surge above pre-pandemic levels.
EICHER: The plan is premised upon the COVID emergencies the Trump administration declared in 2020. President Biden extended those emergency declarations and federal agencies used that to expand their powers including the Secretary of Education in these cases.
Lawyer James Campbell represented states challenging the plan.
CAMPBELL: The Secretary is attempting to bypass Congress on one of today's most debated policy questions, student loan forgiveness. After many failed legislative efforts, the Secretary seeks to write off nearly a half-trillion dollars in loans for over 40 million borrowers. No statute authorizes this sweeping action.
The legal questions boil down to a few questions: To begin with, do these plaintiffs even have standing to sue? Meaning, do the states and individuals have a concrete and particularized harm that a court can remedy? And the second question is on the merits. That is, whether the plan is illegal.
REICHARD: The court has to answer the first question on standing before it can get to the second one on legality.
But the justices asked more questions about the merits.
For example, the Chief Justice homed in on one word in the HEROES Act, “modify.” Here’s the law in relevant part, and I’ll read from it directly: the Secretary of Education has the power to “waive or modify any statutory or regulatory provision applicable to the student financial assistance programs [when] necessary in connection with a war or other military operation or national emergency.”
Listen to Chief Justice John Roberts:
ROBERTS: But, in an opinion we had a
few years ago by Justice Scalia, he talked about what the word "modify"
means, and he said modified in our view connotes moderate change. He
said it might be good English to say that the French Revolution modified
the status of the French nobility, but only because there's a figure of
speech called understatement and a literary device known as sarcasm.
We're talking about half a trillion dollars and 43 million Americans.
How does that fit under the normal understanding of "modifying"?
REICHARD: Prelogar for the government cautioned against any universal meaning of the word “modify.” The liberal justices leaned sympathetically toward the government’s reading of the HEROES Act. Listen to Justice Elena Kagan:
KAGAN: I mean, Congress
didn't say exactly the circumstances in which it wanted the Secretary to
use this authority. Of course not. This is -- this is a -- a bill
about, like, what happens when you have an emergency. So what Congress
said is what happens when you have an emergency is the Secretary has the
power to take care of emergencies, and it has that power by way of
waiving or modifying any provision and adding others in lieu of them.
And Justice Ketanji Brown Jackson:
JACKSON: So I'm thinking about the fact that, as a result of COVID, we had massive infusions of money given to various companies, organizations, clearly authorized because Congress said do it. I'm wondering whether that would be unfair to people who didn't own a company or somebody who didn't have, you know, a nonprofit and wasn't getting that money. I just don't know how far we can go with this notion of, to the extent that the government is providing much-needed assistance to people in an emergency…
I found it interesting that nobody brought up the concept of moral hazard. That is, the risk of incentivizing irresponsible behavior by taking away the consequences. I expect we’ll hear from David Bahnsen on that in just a few minutes, but here’s the analysis of Chief Justice Roberts on one aspect of moral hazard.
ROBERTS: You know, you have two situations, both two kids come out of high school, they can't afford college, one takes a loan, and the other says, well, I'm going to, you know, try my hand at setting up a lawn care service, and he takes out a bank loan for that. At the end of four years, we know statistically that the person with the college degree is going to do significantly financially better over the course of life than the person without. And then along comes the government and tells that person: You don't have to pay your loan. Nobody's telling the person who is trying to set up the lawn service business that he doesn't have to pay his loan. He still does, even though his tax dollars are going to support the forgiveness of the loan for the -- the college graduate, who's now going to make a lot more than him over the course of his lifetime….(later)...We like to usually leave situations of that sort, when you're talking about spending the government's money, which is the taxpayers' money, to the people in charge of the money, which is Congress.
The Chief Justice then segued into the Major Questions Doctrine. That prevents presidents from ruling by edict and skirting Congress or procedural steps like notice and comment periods. Which other presidents have done … famously. You might remember:
OBAMA: I’ve got a pen, and I’ve got a phone. And I can use that pen to sign Executive Orders and take executive actions and administrative actions to move the ball forward.
…President Obama in 2014. The high court used Major
Questions analysis to stop his Clean Power Plan, as well as the eviction
moratorium from the CDC under both Trump and Biden and the OSHA vaccine
mandate for employers.
Government lawyer Prelogar saw no connection, though, to education loans:
PRELOGAR: So my reaction to that, Mr. Chief Justice, is that Congress did take those kinds of considerations into account in specifically providing this authority to the Secretary.
The Chief Justice kept up the pressure in the second case, too, about skirting procedural requirements.
ROBERTS: Now we take very seriously the idea of the separation of powers and that power should be divided to prevent its abuse, and there are many procedural niceties that have to be followed for the same purpose.
Round and round they went, dodging and ducking meaning and intent.
President Biden said the pandemic was over in September, and then extended the national emergency designation until May 11th.
Interestingly, the Biden administration itself found that more than half of borrowers thought they could repay their loans.
In these times of massive debt and rising prices, I’m reminded of a quote often attributed to Illinois Senator Everett Dirksen back in the 1960s, on how federal spending gets out of control: “A billion here and a billion there, and pretty soon you’re talking real money.” Of course, Dirksen if he said it may have been on to something.
He died in 1969, and the federal budget today is more than 35 times the size it was then.
And that’s this week’s Legal Docket.
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