The World and Everything in It - January 31, 2022

MARY REICHARD, HOST: Good morning!

A Supreme Court justice announced his retirement, but the work of the court goes on. Today, fights over Medicare reimbursement.

NICK EICHER, HOST: That’s ahead on Legal Docket.

Also, economic growth beats expectations. I’ll ask David Bahnsen to dive into the government’s latest report on Gross Domestic Product—that’s today on the Monday Moneybeat.

Plus the WORLD History Book. Today, the 160th anniversary of a unique war-fighting vessel.

REICHARD: It’s Monday, January 31st. This is The World and Everything in It from listener-supported WORLD Radio. I’m Mary Reichard.

EICHER: And I’m Nick Eicher. Good morning!

REICHARD: Now here’s Kent Covington with today’s news.

KENT COVINGTON, NEWS ANCHOR: UK foreign secretary: Russian invasion of Ukraine “highly likely” » It is now “highly likely” that Russia will invade Ukraine. That’s the world from British Foreign Secretary Liz Truss.

TRUSS: The number one priority is deterring Vladimir Putin from taking that action. That’s why we are offering to deploy extra troops into Estonia.

She said the U.K. is also “providing more air support across the Black Sea” and “supplying defensive weapons to Ukraine.”

In Washington, Defense Secretary Lloyd Austin and Joint Chiefs of Staff Chairman Mark Milley are warning that Moscow has amassed enough firepower along Ukraine’s border to invade its largest cities.

Pentagon spokesman John Kirby…

KIRBY: He has a lot of options—he, Putin—has a lot of options available to him if he wants to further invade Ukraine, and he can execute some of those options imminently.

Ukraine’s ambassador to the United States, Oksana Markarova, warned that Russian President Vladimir Putin is bent on waging an “attack on democracy,” and that no one is safe.

MARKAROVA: And if Ukraine will be further attacked by Russia, of course they will not stop after Ukraine.

Lawmakers on Capitol Hill said they’re nearing an agreement on—quote—“the mother of all sanctions.”

And U.S. officials plan to put Moscow on the defensive at a meeting of the UN Security Council today. They say they’ll press the Kremlin to explain itself.

But there’s zero chance of any formal action by the Security Council, given Russia's veto power.

Trump suggests pardons for Capitol rioters if he returns to White House » Former President Donald Trump has not yet said whether he will seek a rematch against President Biden, who has said he plans to run for reelection.

But at a weekend rally in Texas, Trump suggested that if he does run again and wins, he may pardon some of the people convicted of crimes connected to last year’s Capitol riot.

TRUMP: We will treat them fairly. And if it requires pardons, we will give them pardons, because they are being treated so unfairly.

Authorities arrested more than 700 people in what is the largest investigation in the Justice Department’s history.

Prosecutors charged more than 150 people with assaulting more than 100 police officers. More than 50 others also face conspiracy charges.

Two Republican senators on Sunday criticized Trump's suggestion of pardons. Sen. Lindsey Graham told CBS’ Face the Nation, he thought the remarks were inappropriate.

GRAHAM: I want to deter people who did what they [did] on January the 6th, and those who did it, I hope they go to jail and have the book thrown at them because they deserve it.

And Maine Sen. Susan Collins said “We should let the judicial process proceed.”

Democrats in the House are pushing to compel former Trump officials to testify in an ongoing probe of the Capitol riot. The former president has dismissed the investigation as a witch hunt.

North Korea tests longest-range missile since 2017 » A North Korean missile soared over the Sea of Japan on Sunday crashing into the water 500 miles off the coast. It appeared to be the longest-range missile the North has fired since 2017.

The Japanese and South Korean militaries said the missile launched on a high trajectory, apparently to avoid the territorial spaces of neighbors.

Sunday's test was the North’s seventh this month. The country is once again ramping up its missile testing more than two years after walking away from nuclear talks with the United States.

But U.S. Ambassador to the UN, Linda Thomas-Greenfield, said the diplomatic door remains open to Pyongyang.

GREENFIELD: We are absolutely open to a diplomatic engagement without preconditions. Our goal is to end the threatening actions that the DPRK is taking against their neighbors.

But many analysts say this is straight out of the North’s old playbook of ramping up threatening behavior in an effort to extract concessions from its neighbors and Washington.

Pyongyang wants relief from crippling U.S.-led sanctions in exchange for returning to the bargaining table.

East Coast digs out after blizzard » Millions of people in the Northeastern United States are still shoveling their way out of driveways. That after a vicious nor’easter battered the region with powerful winds and buried many areas from Virginia to Maine in inches or feet of snow.

The storm packed wind gusts of more than 80 miles per hour and knocked out power to more than 100,000 customers.

Massachusetts Lt. Gov. Karyn Polito on Sunday told residents that snow plows are hard at work, but if you don’t have to drive, stay home.

POLITO: In some places, you’re seeing asphalt roads, which is great, but still more work to do, especially in the eastern part of the state.

Boston tied its record for the biggest single-day of snowfall on Saturday, with almost 24 inches.

In and around New York City, snow totals ranged from a few inches in some areas north and west of the city to more than 2 feet on Long Island.

The sun was out on Sunday in the Northeast, but temperatures remained well below freezing.

I’m Kent Covington. Straight ahead: a fight over Medicaid reimbursements.

Plus, the first winter Olympics outside Europe.

This is The World and Everything in It.

NICK EICHER, HOST: It’s Monday the 31st of January, 2022. Glad to have you along for today’s edition of The World and Everything in It. Good morning, I’m Nick Eicher.

MARY REICHARD, HOST: And I’m Mary Reichard. It’s time now for Legal Docket.

Justice Stephen Breyer on Thursday confirmed his retirement from the United States Supreme Court. Here’s Justice Breyer in 2009, talking about the Constitution on C-SPAN.

BREYER: Look at this document. I mean it’s a very, very thin document. But it’s been in existence for 200 years. People in this country don’t agree about a lot of things. And despite enormous disagreement, they’ve decided to resolve their differences under law. I mean we’re seeing countries on the television nonstop where they don’t have that tradition. And what happens is they shoot each other. And here we don’t. Over time, people have come to the realization that it’s better to follow the law, including interpretations that you don’t agree with, than it is to take to the streets. Now that’s a tremendous, tremendous treasure for the United States of America. 

President Biden pledged to nominate a replacement before the end of next month. He has said he’s already narrowed the field down by sex and ethnicity. Democrats say they want to confirm the nominee as quickly as Justice Amy Coney Barrett was confirmed in 2020. That took only four weeks. Democrats could then confirm his nominee without the support of Republicans. And that allows them to get ahead of the midterm elections in which polls indicate Democrats may not hold that same advantage in the Senate after that election.

EICHER: Last week the U.S. Supreme Court handed down one opinion in an argument we covered two weeks ago, Hughes v Northwestern University.

In that case, a unanimous decision reinstated the lawsuit involving employees of the school who participated in its retirement plan. Those employees sued the school and argued the plan managers failed their fiduciary responsibilities federal law requires of them.

A lower court threw the case out, but the justices sent it back to the appeals court to reassess whether the employees’ allegations give rise to a viable claim.

REICHARD: Now, onto oral argument. And today, legal correspondent Jenny Rough covers three cases arising under health care law. Each case ties into how Medicare or Medicaid reimburse people. Hi, Jenny.

JENNY ROUGH, LEGAL CORRESPONDENT: Hi, Mary. Well, this first case involves a tragic accident. Gianinna Gallardo was 13 years old in 2008 and living in Florida when she stepped off a school bus and got hit by a truck. Her injuries left her in what doctors call a persistent vegetative state. She’s now in her 20s.

REICHARD: The girl’s parents sued the truck owner, the truck driver, and the school district in a personal-injury lawsuit. The Gallardos allege more than $20 million in damages. That includes past and future medical expenses, loss of future earnings, and the loss of capacity to enjoy life.

ROUGH: Right. Now, cases like these are complicated. Disputed facts. Limits on insurance policies. All that to say, the parties settled for only $800,000. Some of that compensation went for past medical expenses, some set aside for future medical expenses, and some for non-medical expenses, like lawyer fees.

That underlying case is over and done with. 

This case relates to it. After the accident, Florida state’s Medicaid agency paid out $862,000 to help with Gallardo’s medical needs. Now it wants that money back and seeks reimbursement from the $800,000 personal-injury settlement.

REICHARD: A fight over money. We should add here that the federal Medicaid Act requires state agencies to seek reimbursements in situations like this. Where third-party liability payments are involved.

ROUGH: Right. So now the question is how much does Florida get back?

Gallardo’s parents say $35,000. That’s the portion of the $800,000 settlement that the parties earmarked for past medical expenses. Florida says it’s entitled to a lot more. It argues it can recoup the settlement money allocated to past medical expenses and can also recoup what was earmarked for future medical expenses.

Gallardo’s lawyer Bryan Gowdy rejects that. Here he is making his point in oral argument before the Supreme Court.

GOWDY: Medicaid provides a benefit to persons needing medical care. It is not a loan to be repaid later. But in 1968, Congress established a limited pool of third-party liabilities from which a state could seek reimbursement for Medicaid expenses. A liability for future medical expenses does not pay for care available under the Medicaid plan and, thus, is not part of the pool of reimbursement funds. 

On the other side, lawyer Henry Whitaker for Florida:

WHITAKER: To help keep Medicaid solvent, Congress made Medicaid the payer of last resort. As part of that role, Medicaid recovers money from tortfeasors who injure Medicaid beneficiaries. The question here is whether the program may seek that reimbursement from a tort settlement, not only out of medical damages or medical expenses paid in the past, but also for medical expenses that will be paid in the future. The statute answers that question. It provides for Medicaid beneficiaries to assign to the program rights to payment for "medical care," not past medical care, not some complicated subset of medical care. Medical care, period. Including payments for medical care that may be necessary in the future. 

Gallardo’s lawyer says hold on. A second, different provision says reimbursement is limited to payment that has been made for health care services furnished. Past tense. So the legal dispute boils down to statutory interpretation and how to read two seemingly inconsistent subsections of the Medicaid Act.

Justice Elena Kagan wondered if Gallardo’s lawyer was drawing the line in the wrong place.

KAGAN: I would not think that this language makes a distinction between past and future payments, as opposed to payments for things that Medicaid covers, and payment for things that Medicaid doesn't cover. There are some things that we know that Medicaid is not going to cover, and those are kind of read out of this provision.

For example, past and future medical expenses on one side of the line. Non Medical expenses, like lawyer fees, on the other.

When lawyer for the Florida agency took his turn, Chief Justice John Roberts asked about that underlying personal injury case.

ROBERTS: Counsel, does the state ever participate in the underlying litigation?

Go after the truck driver and school district directly. The way Gallardo’s parents did.

WHITAKER: Well, certainly Florida's statute allows us that authority. We don't do that. It's not cost-effective for it to do it that way, for us to—

ROBERTS: Well, maybe not in every one, but if you have sort of ones where the amounts will be significant, that would avoid the allocation hearings after the fact, and you could address those things in the structuring of the, of the settlement or the judgment, right?

At a minimum, Florida could have stepped in and participated in those settlement discussions, and it didn’t.

The second case involves a dispute over Medicare payments to hospitals that serve a high number of low-income patients. Those hospitals get extra money in routine Medicare reimbursements, more than an average hospital would get. That’s because low-income patients tend to be sicker and have more complications. How much additional money do those hospitals get? That’s calculated by a formula set forth in the Medicare Act.

Here, Empire Health sued to challenge the way the government does that calculation. It boils down to a dispute between the phrase entitled to benefits versus eligible for benefits. The government treats those phrases similarly here. Empire Health says those terms have different meanings.

Bottom line? If the government gets to calculate the formula the way it proposes, it’ll drive down the amount it pays to hospitals. If Empire Heath’s interpretation is adopted, hospitals will get more money.

There are good arguments on both sides.

Finally, the last case. Prescription drugs. Hospitals that provide care for underserved populations get a deep discount on prescription drugs. So the government adjusted Medicare reimbursements to those hospitals. Reduced them to better match the price those hospitals actually pay.

The American Hospital Association and others sued, claiming the Medicare statute doesn’t allow the government to do that in the way it did.

The court has an opportunity here to do some adjusting itself to a controversial doctrine known as Chevron deference. That says courts defer to an agency’s interpretation of an ambiguous statute.

Justice Clarence Thomas didn’t beat around the bush in this question to lawyer for the hospital association, Donald Verrilli:

THOMAS: Are you arguing that we should overrule Chevron to get to the statutory approach that you're taking?

VERRILLI: We think this is a situation in which the statute is clear, unambiguous, at the first stage of Chevron I -- of Chevron and, therefore, that one doesn't get to the question of whether Chevron needs to be overruled.

The question came up a second time—now by Justice Samuel Alito and worded slightly differently.

ALITO: If the only way we can reverse the D.C. Circuit is to overrule Chevron, do you want us to overrule Chevron?

VERRILLI: Yes. We want to win the case. Yes.

The amount of discretion given to the administrative state has irked many in the legal community for years. Maybe this’ll be the case to remedy some of that “irk.”

And that’s it for this week’s Legal Docket. I’m Jenny Rough.

NICK EICHER, HOST: Dozens of college students are accidentally getting a full-ride, paid-for college education.

It all started with an email that went out to 58 students.

High school student Parker Christensen of Newaygo, Michigan said he couldn’t believe it when he checked his email.

Central Michigan University informed him that he had won a prestigious scholarship from the school. That meant he would receive full tuition, room and board, all the books he needed and even a $5,000 study award.

Christensen told TV station WXMI:

CHRISTENSEN: Parents were both happy, family was all blown away. Friends were happy for me; teachers.

But a few days later he received another email that essentially said… Oops, sorry.

Yup, the school mistakenly sent the email to Christensen and 57 other students, each of whom had spent days celebrating with their families.

The school explained it accidentally sent the email while testing its servers.

But they’re making it right by awarding each of the students an annual scholarship worth nearly $13,000 per year, the equivalent of full tuition.

So in the end, a happy accident!

It’s The World and Everything in It.

MARY REICHARD, HOST: Next up on The World and Everything in It: the Monday Moneybeat.

NICK EICHER, HOST: Time now for our regular conversation on business, markets, and the economy. Financial analyst and adviser David Bahnsen is here. Morning, David.

DAVID BAHNSEN, GUEST: Good morning, Nick. Good to be with you.

EICHER: Government closed the books on 2021 last week: fourth quarter gross domestic product figures are in, the one big economic number to follow if you’re keeping score at home, GDP representing growth in our economy. So for Q4, October, November, December—good news—the consensus expectation was a 5.5 percent rise in GDP and the reality was much better than that by almost a percentage point and a half, nearly 7 percent growth—6.9—you’ve got to like that.

BAHNSEN: Yeah, I think it's fine. It was primarily driven about 2% of it was from inventories. And so that's the one ingredient in GDP growth that isn't repeatable. And so it isn't as encouraging as if it had been you, let's say non residential fixed investment, which is business expenditures, business investment - that is the area that we think builds more productivity into the future where inventory accumulation does not. So all things being equal, it's better than if the number had been lower. But here's the part, Nick, that I detected that I think is very interesting. If you now annualize the GDP growth, since 2019 - so you factor in the big contraction of economic growth we had from COVID, and then the economic growth recovery - you get an average of 1.6% per year real GDP growth. Well, you know what the GDP growth number has been per year since 2008. 1.6%. So you both have the total elimination of COVID from the economic data as if it never happened, the bad year and good year, put together just wash each other out. That's good. But then you just get back to where we were before, which is stagnant economic growth, on average, since the financial crisis, equaling half of what our post World War Two economic growth has been. We had averaged 3.1%. And we're now sitting there just a snick over half of that level. I think that's probably the far more important story of economic growth that plays into this thesis I've had about deflation, about stagnation, the term we use economically, Japanification. This is the story for the next 10 years. But for the story of the last one year, there has been great economic recovery as you would have expected.

EICHER: You mention the financial crisis of 2007 and 2008 as the dividing line separating those years of solid growth versus our current years of anemic growth, but what happened, David? Seemed like pre-Covid, with a more supply side economic policy in place during the Trump years, your friend and colleague Larry Kudlow advising the president, that we seemed to have escaped what a lot of economists were describing what we had to expect as our new normal, that we just had to get used to low, slow, or no growth in the economy and we had gotten back to those pre-crisis growth rates near 3 before Covid hit. What happened to that?

BAHNSEN: Well, we did have one year during the Trump administration of getting 3% economic growth, basically getting almost back to trendline. It was the largest year of economic growth we've had since the financial crisis. I happen to believe part of the trade war, that was part of the President Trump's economic agenda did hurt some of the cause, it held back some of the business investment that could have pushed things further. But then you're right, by the time we were getting to see what some of the recovery of that would have looked like and some of the the new rounds of global trade agreements that were being worked out with Bob Lighthizer and Steve Mnuchin and others, then COVID came and so we don't necessarily know. I do think that the deregulation during the Trump administration, and I think that the tax cuts proved to be extremely productive. But they were not what all of us would have hoped for on the business side and corporate side. They were various supply side and they were very helpful towards stimulating economic growth, but there wasn't much supply side tax reform on the individual side. But the deregulation, the energy independence, and the corporate tax reform, those are the three planks of what I believe the Trump administration's tax platform ended up being. And it was very productive. But we need a lot more than Washington, DC’s help here. When I talk about the supply side, that is not a synonym for tax policy. And that's what people believe it is now - that's how the left portrays it, that's how the media portrays it. But I'm talking about this stuff you and I talked about sometimes - people going back to work, increase in productivity, a better education system, a better Christian theology about work. about economic growth. There is a lot of things that play into a society that becomes more productive and extracts more out of the natural creation that God has given us. Well, that's what supply side economics is - is a focus on productivity versus consumption. Consumption takes away economic growth, production builds economic growth. And my view is that the need of the hour, if we want to see 3.1% again, goes far beyond tax policy.

EICHER: All right, David Bahnsen—financial analyst and advisor—head of the financial planning firm The Bahnsen Group. He writes at DividendCafe.com, daily email newsletter on markets and the economy. David, see you next week.

BAHNSEN: Thanks for having me, Nick.

NICK EICHER, HOST: Today is Monday, January 31st. Good morning! This is The World and Everything in It from listener-supported WORLD Radio. I’m Nick Eicher.

MARY REICHARD, HOST: And I’m Mary Reichard. Coming up next: The WORLD History Book.

Today, the first ironclad warships hit the waves and the United States hosts the Winter Olympic Games. But first, a curious Portuguese holiday.

Katie Gaultney has the week off, but Associate Correspondent Harrison Watters is filling in.

HARRISON WATTERS, ASSOCIATION CORRESPONDENT: In the mid 1400s, the Portuguese explored the coast of Africa under King Henry the Navigator. Within 100 years, Portugal established colonies in Africa, India, and Brazil. As an ocean empire, the country was the first European nation to have many families separated by half a globe as the men went to sea—and that separation fanned into flame an emotion that now has its own holiday.

CLIP: “It’s a distinctly Portuguese emotion called saudade - a kind of yearning or nostalgia.”

Saudade is a word that has no easy English translation. It’s a longing for people who are absent and may never return—tinged both with sadness and happy memories. As many Portuguese left their home country in the 19th and 20th centuries, the word came to include longing for home. Today, saudade is commemorated primarily in music, like this 1989 song by Gilberto Gil, Brazil’s former Minister of Culture.

TODA SAUDADE BY GILBERTO GIL: “Toda saudade é a presença, Da ausência de alguém, De algum lugar, De algo enfim…”

While it’s unclear why Brazilians celebrate Saudade Day on January 30th, it’s an opportunity for many to remember loved ones and places with bittersweet longing.

From Portuguese sailors to American shipbuilders, this week marks 160 years since the USS Monitor first set sail—only without the sail.

During the American Civil War, the Union Navy blockaded Southern ports. But rumors came out of Norfolk, Virginia, that the Confederates were building a steam powered ship encased in iron armor—the Merrimack. It could deflect cannonballs and cut through the Hampton Roads blockade.

If an ironclad gunship could defeat the Union frigates, nothing would stop it from sailing on to Washington D.C.—except for maybe another ironclad. So the Union Navy quickly commissioned John Ericson, a Swedish-born engineer, to build an ironclad ship of its own.

One hundred sixty-one days later, the USS Monitor slid into Manhattan's East River and stayed afloat, despite critic’s predictions that “Ericson’s Folly” would sink. Monitor could float, but it barely looked like a ship, as one character noted in the 1936 film Hearts in Bondage:

MOVIE CLIP: What in tarnation is it? I don’t know, but it looks like a cheese box on a raft! [LAUGHTER]

With its flat deck just a couple feet above the waterline and a gun turret toward the back, the ironclad looked more like a modern submarine than a 19th century man-of-war.

Retired Commander Ty Martin, a U.S. Navy Historian, describes genius of Ericson’s design this way in The Great Ships Ironclads Documentary:

CLIP: Erickson’s design was created to carry a weapons system first, and everything else was secondary to that. It was an excellent fighting machine. It had a gun turret. So instead of having a number of guns running down each side of the ship, you had a fewer number of guns in a central position and you could turn that central position to aim the guns.

In March the Monitor arrived at Hampton Roads just in time, coming around the stranded USS Minnesota as the Merrimack was preparing to sink her. The duel of the ironclads lasted four hours while the ships dented each other with cannonballs until Monitor fell back to defend the Minnesota and Merrimack ran aground before returning to Norfolk for repairs.

While the battle was a draw, it demonstrated the power of ironclad ships and changed the priorities of naval warfare forever.

And finally, we end today in Lake Placid for the Winter Olympics

SPORTSCASTER: “Five seconds left in the game. Do you believe in miracles? YES!!!”

No, no, not that Lake Placid Olympics - THIS Lake Placid Olympics.

NEWSREEL: [FANFARE] The Olympic Games are on!

Ninety years ago this week, the Olympics left Europe for the first time and came to America for the 1932 Winter games.

NEWSREEL: And there’s the U.S. #1 team, Fisk driving. There they go.

While California won the bid for Los Angeles to host the Summer games, Lake Placid, New York, was selected to host the Winter Olympics, thanks in large part to the lobbying efforts of Godfrey Dewey, son of the Dewey Decimal System inventor.

Only 17 countries participated, down from 25 four years earlier—thanks to the Great Depression. Franklin Delano Roosevelt, then still the governor of New York, kicked off the ceremonies.

In addition to being the first Olympic games in America, the 1932 Lake Placid games were the first to use a victory podium for the medal ceremonies. It was also the first and only Olympic games to feature a dog sled competition.

Twelve contestants from the United States and Canada ran a 25.1 mile course, and Canadian musher Emile St. Godard came out on top. While there have been several attempts to bring dog sledding back to the Olympics, dog lovers will have to be content with the silent footage from 1932.

Maybe you’ll be feeling some saudade for sled dogs at this year’s winter Olympics.

And that’s this week’s History Book. I’m Harrison Watters.

NICK EICHER, HOST: Tomorrow: preparing for invasion. We’ll tell you how foreign missionaries and other Christians are doing in Ukraine.

And, U.S. allies are not so enthusiastic about squeezing Moscow with economic sanctions over a possible invasion of Ukraine. We’ll hear why.

That and more tomorrow.

I’m Nick Eicher.

MARY REICHARD, HOST: And I’m Mary Reichard.

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