 Hello everybody, Stefan Malinu from Free to Main Radio, sitting in for Peter Schiff. Hope you're doing well this fine morning. We are going to be talking about, oh, it's a more exciting topic that it sounds, perhaps, which is the Libertarian Challenge or the Rational Legal Challenges to Obamacare. I am joined by the one and only Stefan Kinsella. Stefan, are you on? Stefan, how are you doing? I'm doing well, how are you doing? I'm doing wonderful. Glad to be here. Well, let me tell you, so looking at this implementation from outside the country is really quite fascinating. I mean, I have all sort of my Libertarian perspectives and so on, but even by government standards, this just seems to be an entirely mad implementation. It's like the plane is leaving the runway and they're still trying to stick on the wings with glue, duct tape and prayer. So what is going on? Why can we expect some significant legal challenges to the implementation of Obamacare? Can you hear? I can hear. Sorry about the technical difficulties. No problem at all. So yeah, what can we expect in terms of legal challenges to the implementation? Why is this thing so chaotic? Well, it's kind of because it's a piece of legislation, it's gargantuan, and I mean, it's virtually impossible to get a piece of legislation like this written much less enacted without some kind of internal contradictions or inconsistencies or gaps. One of those was dealt with already in the earlier challenge of the legislation where Supreme Court Justice, Chief Justice Robert, defected and went to the other side and basically said that this power to make people pay a penalty if they don't purchase Obamacare is covered by the taxing power. I think we may have lost him again. Stephen, is Stephie there? I'm here. Can you not hear me? Well, until he comes back, I wanted to mention a few things that I think are particularly exciting about the planet Obamacare. So right now, of course, the focus has been on the website and that is particularly challenging. Of course, the website eventually in some manner or another is going to be fixed and then I guess things are going to move on from there and it will be sort of remembered as a troublesome rollout and so on. But these kinds of things generally will get fixed over time, although there's massive, massive features and functionality in the site that are not there. But the legal complications and challenges still exist. Steph, are we still connected? I'm here now. Sorry about that. So yeah, if we can go on with the legal challenges. Yeah, so the current legal challenge is one brought by Attorney General Oklahoma, Pruitt. And his challenge is that the way the legislation is written, Obamacare set up, it permitted the state to set up these exchanges but it couldn't compel them to do so because of our federalism issues. So it tried to give them an incentive to do that by providing subsidies to people who sign up through the state exchanges and also it penalizes you through the IRS if you don't sign up through the exchanges. Can you hear me? Yes, go ahead. Okay, and so the law apparently did not provide for any kind of subsidies or even penalties for the federal exchange or sort of a backstop. Well, what's happened is only about 16 of the states have signed on so far. So about 34 states do not have state exchanges. So right now the whole plan is resting upon the federal exchanges. But the IRS is trying to apply the subsidies and the penalties to people through the federal exchanges even though it's not provided for in the face of the legislation. So this lawsuit is trying to say, listen, it's actually illegal for there to be a subsidy or a penalty to people through the federal exchange provision. And if this happens, it could be like a $700 billion hit to the entire program and it could gut it and make Obamacare even less workable than it would have been anyway. Yeah, and I think another challenge that is going to occur is they obviously require what they call the young invincibles and don't we all think we're invincible when we're young? The young invincibles are required to sign up and they're, well, pretty much not because they recognize it's a direct subsidy to the older and the sicker members of society. And so they're not signing up. So it seems to me that the law as written has provided certain penalties, but those penalties I think are going to have to increase for this thing to remain remotely solvent. What are your thoughts on that? I think they're going to have to increase and they're going to have to increase the subsidies. If you're going to get more and more draconian, obviously, I think the rates are going to start rising because you're basically forcing insurance companies to cover things that they wouldn't have otherwise covered and to cover people with pre-existing conditions. So there's no way that it's going to happen without an increase in rates. And when the rates increase, then people have less of an incentive to even acquire insurance, so you're going to have to increase the penalties to, you know, force people to sign up for it in the first place. Right, and those are two sides of the same coin. I mean, insurance in its most essential form has to be a gamble. It has to be a gamble. You cannot buy fire insurance for your house when it is currently on fire. The whole point is you have to have the veil of ignorance. You have to not know what is going to happen in order for insurance to work. So the idea that you can wait until you get sick to buy insurance is why now everyone has to be forced to buy it. It's one of these classic situations where one set of government rules creates distortions in what's left of the market requiring yet another set, yet another set, yet another set of government rules. The moment you say to people, you can apply for health insurance when you're sick. A lot of people will simply wait until they get sick and then apply for insurance, which means that insurance costs go sky-high. So you then have to start forcing people to join these exchanges simply because you have these coverings. What do you think of that? No, I agree completely, and this shows the problem. What we're really doing here is we have a huge intervention and a big swap of the biggest economy in the world. And it's being done totally by legislated law, which is an arbitrary set of laws, which is why we have the dispute over it. No one really knows exactly what these words mean. It shows the pitfalls of the very idea of making law by legislation. So you and I can discuss forever how would the Supreme Court rule, how would they interpret this provision of this huge 100-page statute of the Affordable Care Act or Obamacare? But the only question is one of grammar, really, or interpretation. What does the word mean? It has nothing to do with justice. We think of courts as doing justice, trying to find the right solution to a dispute between people, trying to do the right thing, trying to have the fair result. So the courts, in the old days, or conceived of, is trying to do justice, trying to find the right result. Courts now don't try to do justice. They just try to interpret words written by congressmen. So it's really just one of lexicography and then a battle over these kinds of issues. So when you have that, there's no way you're going to have a just result. You're just going to have some final result of the way words written on paper by a bunch of politicians are going to be interpreted for the time being. Right, which leads you to all of the problems of unpredictability and randomness and so on. And I think this comes out of a fundamental shift in the law, which I would argue has sort of occurred over the past couple of generations. Before the sort of rise of the welfare state and the nanny state and the welfare warfare state and so on, you basically had a state that sat around and waited for a complaint. You know, hey, some guy cheated me in a contract or some guy stole my bike or some guy dinged my horse and buggy or something like that. The government basically sat around the law system, sat around passively waiting for a complaint and then it would attempt to resolve its complaint according to sort of common law traditions and hopefully clear interpretation of legalese in contracts and so on. But it was kind of passive. And now you have these massive proactive social engineering topics. We're going to end poverty among the old. We're going to make the sick well again. And we're going to go forward, stride forward and go in like the Borg, like all of these infinite tentacles of language. And we're going to make the world a better place. The government has become massively proactive. And it seems to me that the law as a reactive thing is small, compact and easy to understand, something that you can fit into your pocket. But the law as a proactive, massive social engineering behemoth seems to be something that can grow literally without limit. Yeah, I think what's happened is the state takes over institutions that are natural and they have their own justification because they serve a purpose in civil society. And the state gradually takes them over and co-ops them for the purpose, like roads and transportation and education and law. And, you know, the things that the government takes over, the state takes over. In fact, the state has taken over the government itself, the governing institutions of society. And they take them over so that over time people identify these institutions with the state. So, for example, if you mention a road now, most people imagine a road built by the state. And that some of them have trouble even imagining non-state built roads. Of course, the government, the state did not come up with roads. And the same thing with law. So, and the government borrows the prestige of these things. So, law had prestige and value in the eyes of the people because it was customary. It was traditional. It arose from voluntary interactions and a private attempt to solve disputes. And when the government takes this over and infiltrates it and makes it institutionalized, starts passing laws and legislation, gradually corrupting the natural private body of law with all these artificial rules passed by congressmen and regulatory agencies and the edicts of executives like the president, they're basically borrowing the prestige of the way law used to work. But over time it becomes apparent to the people that these laws are not just. I don't think most people now think they're doing something immoral if they fail to do exactly the right thing on an income tax return or if they break a speeding law or some other arbitrary immigration type law. They try to comply with it because there's a threat there. But the connection between morality and law is gradually being lost because the government is exercising more and more naked power under the false label of what used to be called law. And that is particularly tragic because people often tend to throw out the baby with the bath order when you have a lot of irrational regulations and controls that people become hostile to or indifferent towards. There tends to be a general disrespect for the law that grows, which is a shame because I mean, I think there are good rules, good laws. I kind of like that thou shall not kill, steal, murder and rape. But I do actually have some problems with this hyper-regulation situation. And now the implementation, even from a cash standpoint, is completely mad. So recently they've said that we can't tell the insurance companies, we can't tell them exactly how much that we need to pay. We can't tell you how much we need to pay you because we can't process the data. So just send us a bill for what you think we might owe you and we'll sort it out later. So from that standpoint, things are getting really, really dicey. And I think it's either going to have to roll back or it's going to be the end of the remnants of the free market in health care. Steph, we're going to have a quick break. If you can stick around afterwards, we're going to talk IP. And if you can stick around even more after that, we'll take some calls. But thanks so much. This is Stefan Molyneux for the Peter Schiff Show. We will be back after the break. The Peter Schiff Show. Pro marks, right? Well, no. Peter Schiff Show. When you're sitting in for Peter Schiff, I have the other Steph. I think there's only two of us in the whole world, Steph and Canceler, a lawyer and a specialist in IP. So we're going to switch gears from Obamacare a little bit and let's talk about Apple and Samsung. Can I tell you how disappointed I was, Steph, when I found out that Samsung had not in fact paid Apple over a billion dollars in nickels? That, to me, was a story that should have been true tragically. It wasn't. But what is going on with these two companies and what are some alternatives to patent trolls, patent wars, and all of the, you know, makes lawyers rich, makes entrepreneurs cry and makes consumers poorer? What's going on with these two companies? What options can we learn and what are some options that we can have instead of the current system? So what's going on is you have these large companies who are taking advantage of the existing patent law system, which is spread around the globe, exists in all the modern industrial countries. And they're using the patent law system for what it was designed for, which was to stop competition. And that's what it does. They have large companies to acquire massive arsenals of patents, which they can use to stop small, upstart competitors from even competing with them. And they can have big wars with the big guys, and they can pay millions and millions of dollars of fees to patent law firms to engage in these little skirmishes and battles. And at the end, they settle, they pay each other a royalty or something like that. They raise prices, they reduce innovation because they don't have to compete anymore because they have a patent that can rely on, and they pass the cost on to the consumers in the form of raised increased prices. And they keep the new entrance out. So basically the patent system creates cartels or oligopolies, where you have a small number of very powerful protected companies behind the big walled garden of patents. So the solution is not what is being proposed in Congress as we speak, which is this innovation bill, the so-called innovation bill, which is aimed at slightly reducing some of the excesses of the patent troll problem. Now, the Apple Samsung, the smart war, the smart phone patent war's problem has got almost nothing to do with patent trolls because most of the players that are suing each other are actually making smart phones. They're actually just trying to protect their own turf. So the patent troll problem would not address this at all. The patent troll problem is just someone who has a patent on a product they don't make or manufacture, and they just go out and they try to collect a little toll from people to keep making this. They sue them to get a little piece of the action. Actually, patent trolls, in my view, are not as harmful as the Apple, et cetera, players because these guys want to prevent competition and kill off their big competitors if they can. Patent trolls just want a little, you know, they're like the mafia. They just want a little taste. They're actually a lot less damaging. The current pending legislation is so minor, and yet the patent industry is fighting it so hard, it shows that the prospect of real patent reform is almost zero. The real solution is to just go around the patent system by using 3D printing and encryption and just cheating and piracy. That's really the only way to get around it, to ignore the state and find a way to get around the state. The current bill will only make it slightly harder for so-called trolls to initiate lawsuits in some cases. An analogy would be to the current marijuana, cocaine, drug war that we have in the U.S., a law saying that if you're convicted of cocaine or marijuana offense, we're going to give you a nice, seedy, posturpedic pillow to sleep on in the jail cell. I mean, that's basically what this law would do in the patent term. It would do almost nothing to solve the real problem of patents. Now, most people think when you talk about patents and you say, well, maybe we could find some way around patents and, of course, I love classical music. We actually would not have our classical music tradition if we'd had copyrights and patents back in the day when people were freely adapting each other's people music and so on. We know that actually quite factually because countries where there was no copyright and patent door had by far the greatest proliferation of musicians and have provided really the canon of western classical musical tradition. But when you say about, well, maybe we could have a life without patents and, of course, people immediately say, like they think if the government doesn't build the roads, we're all just going to fall into deep trenches in the ground. People say, well, then there'll be no innovation. How are people going to get paid for their intellectual achievements and inventions and so on? Why would people invest in anything if they couldn't monopolize the products and so on? And I know you've talked about responses to these objections and what would you say to people who would raise that? I mean, some of the typical examples that they have raised in the past and they raise now, like Tang is a good example. They'll say that, you know, NASA and all the billions that the United States invested in the space program, people will say, what did we get out of it? And they'll say, well, we developed Tang for the astronauts to drink in outer space, some kind of sugary powdered orange drink, you know. It's just ridiculous or even more substantial innovations. Of course, they're not counting the cost of the money that went into that innovation. Could have been spent in the private economy if it had not been taxed away from its owners. Could have been spent on either consumer goods or development or business innovation or other things. So you can never tell what innovation you've lost because of the taxing power of the state and the regulatory power of the state. The idea that we need the government to help us innovate is transparently absurd. The government is good at a couple of things. They're good at finding wicked weapons like the Moab, mother of all bombs or the nuclear bomb, and then using them against innocent people. So the government is good at a couple of things. They're good at destruction and death and misery and propagandizing the population, but I don't know if that's the kind of innovation we want to be in favor of. Yeah, bad or evil is not really the tagline that we want. So there is a challenge which I'd like to get from the listeners if you'd like to call in. You can ask questions as you like. We've got a course going into the second hour. We'll be back at six minutes.