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Obamacare's architect took same view of subsidies as legal challengers he now calls 'nutty'

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Beltway Confidential,Opinion,Philip Klein,Obamacare,Health Care,Healthcare.gov

On Tuesday, a federal appeals court dealt a blow to President Obama by ruling, based on the text of his health care law, that government subsidies to purchase health coverage were only available to residents of states that established their own exchanges -- not to the 36 states in which the federal government set up an exchange.

Liberals widely ridiculed the decision, which hinged on language in the text of Obamacare that explained that subsidies would apply to “an Exchange established by the State.” To liberals, it was absurd to suggest that Congress intended for subsidies to only go to state-based exchanges. The language in the bill, they argued, was merely sloppy.

And one of those liberals was Jonathan Gruber, a man that the New Yorker's Ryan Lizza described as “an M.I.T. economist and an architect of both Mitt Romney's health-care plan in Massachusetts and Obama's Affordable Care Act.”

Gruber went on MSNBC's Chris Matthews on Tuesday and declared, “It's just simply a typo, and it's really criminal that this has even made it as far as it has.” Last year, he told Erika Eichelberger of Mother Jones that the legal theory behind the court challenge was “nutty,” “stupid” and a “screwy interpretation” of the law.

But back in 2012, Gruber was singing a different tune. At a speech highlighted by Ryan Radia of the Competitive Enterprise Institute, a libertarian think tank that has challenged the administration on the subsidies, and amplified by Reason's Peter Suderman, he in fact took the opposite position.

At the time, Gruber said:

What’s important to remember politically about this is if you're a state and you don’t set up an exchange, that means your citizens don't get their tax credits — but your citizens still pay the taxes that support this bill. So you’re essentially saying [to] your citizens you’re going to pay all the taxes to help all the other states in the country. I hope that that's a blatant enough political reality that states will get their act together and realize there are billions of dollars at stake here in setting up these exchanges. But, you know, once again the politics can get ugly around this.

So Gruber, in making the case for states to set up their own exchanges, was arguing that the billions of dollars in subsidy money should be seen as an important inducement — which is exactly what those who have been challenging the law have been saying.

Now, it's unlikely that this particular video will determine the outcome of the legal case, should it make it to the Supreme Court, as justices will be tasked with determining Congressional intent, and the Obama administration would no doubt argue that what Gruber, a non-legislator, said about the law in 2012 doesn't factor into that.

But in terms of the public debate, this is nothing short of a bombshell. Liberals have launched a campaign to discredit anybody advancing the idea that subsidies were only available to state-based exchanges as alternately dishonest, ignorant or insane. But now there’s video evidence of the left’s go-to expert on the law taking the same view.

To those less familiar with the health care policy world, it's hard to overstate Gruber's influence. As the New York Times reported in 2012, Gruber, “a numbers wizard,” convinced Obama to embrace the individual mandate. That article quoted him as boasting, “I know more about this law than any other economist.” Paul Krugman has called Gruber “one of the three or four top health care economists in the nation.”

With his reputation on the line, Gruber emailed a statement to the New Republic's Jonathan Cohn in which he struggled to explain his 2012 comments. “I honestly don't remember why I said that,” he said. “I was speaking off-the-cuff. It was just a mistake. People make mistakes. Congress made a mistake drafting the law and I made a mistake talking about it.” He added, that his statement “was just a speak-o -- you know, like a typo.”

Gruber attempted one explanation for his remarks, “I might have been thinking that if the federal backstop wasn't ready by 2014, and states hadn't set up their own exchange, there was a risk that citizens couldn't get the tax credits right away.” But that doesn’t make sense from the context of the answer in the video. Had this been the actual point he intended to make, he would have emphasized that it’s important for the federal backstop to be ready in time for residents of states that may choose to not open their own exchanges. Instead, he was lamenting that politics may deprive states of billions of dollars of subsidies.

He said, “if you're a state and you don’t set up an exchange, that means your citizens don't get their tax credits.” And he said so emphatically, without any stipulation such as, “if the federal backstop isn’t ready in time.”

Interestingly, in the same email to Cohn, Gruber wrote, “There are few people who worked as closely with Obama administration and Congress as I did, and at no point was it ever even implied that there’d be differential tax credits based on whether the states set up their own exchange.”

So few people worked more closely with Congress than he did, and no economist knows the law better. But somehow, in 2012, he took the precise viewpoint that he subsequently dismissed as “nutty” and “stupid.”

UPDATE: At Breitbart, John Sexton has posted another video in which Gruber made similar remarks. MSNBC's Adam Serwer emailed Gruber about the second video, and reported: "Asked over email whether those remarks were a mistake, too, Gruber wrote back, 'same answer.'" In other words, a second "speak-o."

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