I was surprised to read that Obama, who took office just last month, was to be credited with the passage of COBRA (the Consolidated Omnibus Budget Reconciliation Act, which among other things modified the Employee Retirement Income Security Act of 1974 to permit employees to obtain continuation of employee beenfit plans after losing eligibility as employees -- in other words, people who quit or were fired could keep employment-based health coverage for in most cases up to 18 months), which is an Act signed into law by Ronald Regan in 1986.
The author apparently is rather behind the times in health policy matters. The news is that continuation benefits under COBRA (for which employees are permitted to be charged up to 104% of the employers' actual cost to run the plans) will now qualify for a 35% federal subsidy (so they pay about two thirds of the unsubsidized cost), provided the employees aren't too well off.
The article also claims CHIP as a feather in the new President's cap. The State CHildren's Health Insurance Program, enacted in 1997, is a state-federal program designed to help families with kids who don't qualify for Medicaid coverage to obtain subsidized health insurance. In Texas, one of the significant barriers to enrollment under CHIP is that the federal government doesn't allow CHIP participation by anyone who can qualify for Medicaid (which would also provide coverage), so in order to qualify for CHIP one must first perform all the steps needed to enable the state to determine Medicaid qualification (else, the federales won't match the state's CHIP expenditures, even up to the matching funds cap). Assuming that prospective participants are properly educated that making more than a few thousand bucks per year isn't actually a disqualifier, but that the forms are just part of a federal hazing ritual, one still has a daunting stack of forms to fill out. This might not seem like a big deal, but to the extremely-busy two-job-working-poor this program should be helping, this kind of hazing ritual is a substantial barrier to entry. Additionalls, many people look at the forms, realize the economic thresholds inquired about are well below their incomes, and give up because they believe they cannot qualify. I'm not sure what amendment to CHIP may have been part of the recent stimulus package, but I'm wagering it's an increase in the federal match cap.
Pouring money into coverage schemes will have the effect of making coverage easier to obtain for the people who can afford their share of the price tag (two thirds of the cost of an employee benefit plan can be steep, depending on the plan), but it does nothing to the structural elements of the health care system that cause the U.S. to outspend every other nation in per-capita health costs. Contrary to the apparent claims of the Obama health policy team, the secret is neither tort caps or the supposed inefficiency of paper records. The most substantial and pervasive cost has to do with the fact that federal law has for decades prevented states from creating universal coverage through mechanisms that would eliminate health risk segmentation by third-party payors and ensure uniform minimum standards. By contrast, federal law has made health coverage a kind of "wild west" in which third party payors with even fairly tenouous connections to employee benefit plans enjoy a "get out of jail free card" in connection with their health coverage decisions. Thus, neither patients, physicians, nor hospitals know what's covered and it takes an entire army of dedicated full-time employees to call, punch through hold queues, and make a case for coverage of a whole host of things that are so obviously necessary or routine that such costly pre-treatment routines do nothing except add 50% to the cost of care.
This transactional friction is attributable directly to federal law, which has prevented state-by-state solutions -- notably in Hawaii and Oregon, but also elsewhere -- that would have helped teach the country how to obtain quality results for a good price under American-tolerable market conditions and without sacrificing expected quality. For someone in the federal government to claim interest in solving this problem with more federal law is the height of D.C. hypocrisy.
It is also utterly unsurprising.
Saturday, February 28, 2009
Friday, February 27, 2009
16 Means 18, and 'Withdraw' Doesn't Mean Withdraw
Finally, we see what President Obama means by his 16-month withdrawal timeline in Iraq. The 16-month timeline whose start date seemed so elusive over the course of the campaign season finally has started ticking (as an 18-month timeline, which is entertaining perhaps but not substantially different), but the meaning of "withdraw" has changed.
Apparently, "withdraw" means "we will leave some fifty thousand troops" after the U.S. finishes its departure in the fall of 2010. That's over twice the 24,500 Bush II planned to leave in Korea to defend against incursion by North Korean totalitarians.
This is rather a more realistic view of withdrawal from Iraq than Obama articulated on the campaign trail. (The winner of the military policy spin game -- played against enemies of secular democracy in Iraq -- was not in fact either McCain or Obama but Iraq's own Prime Minister Maliki.) The places the U.S. won wars -- Germany, Japan, Korea -- have longstanding and substantial U.S. presence to prevent loss of those regions to forces similar to those originally combatted. (Yes, the Nazis were obliterated, but the difference between National Socialism's totalitarian police state and that offered by the Soviets is an acedemic hair; Stalin seems to have more notches in his belt and definitely ran internment camps and secret prisons and summary executions and his successors continued his work to expand global Soviet control.) The idea that the U.S. would "win" a conflict in the Middle East and immediately abandon the region to the forces whose evil invited American intervention in the first place was a naïve view contrary to local practicalities and to long-term U.S. interests.
On the impact of immediate abandonment, one might want to think about Charlie Wilson's war and the effect of U.S. abandonment of Afghanistan following successful ejection of the Soviets. The fact that the Democrats in Congress appear to feel betrayed by Obama's "unacceptable" plan for "withdrawal" suggests -- much as does McCain's apparent approval of the plan -- that it has been developed into something much more practical than the ideological pronouncements made on the campaign trail.
Apparently, "withdraw" means "we will leave some fifty thousand troops" after the U.S. finishes its departure in the fall of 2010. That's over twice the 24,500 Bush II planned to leave in Korea to defend against incursion by North Korean totalitarians.
This is rather a more realistic view of withdrawal from Iraq than Obama articulated on the campaign trail. (The winner of the military policy spin game -- played against enemies of secular democracy in Iraq -- was not in fact either McCain or Obama but Iraq's own Prime Minister Maliki.) The places the U.S. won wars -- Germany, Japan, Korea -- have longstanding and substantial U.S. presence to prevent loss of those regions to forces similar to those originally combatted. (Yes, the Nazis were obliterated, but the difference between National Socialism's totalitarian police state and that offered by the Soviets is an acedemic hair; Stalin seems to have more notches in his belt and definitely ran internment camps and secret prisons and summary executions and his successors continued his work to expand global Soviet control.) The idea that the U.S. would "win" a conflict in the Middle East and immediately abandon the region to the forces whose evil invited American intervention in the first place was a naïve view contrary to local practicalities and to long-term U.S. interests.
On the impact of immediate abandonment, one might want to think about Charlie Wilson's war and the effect of U.S. abandonment of Afghanistan following successful ejection of the Soviets. The fact that the Democrats in Congress appear to feel betrayed by Obama's "unacceptable" plan for "withdrawal" suggests -- much as does McCain's apparent approval of the plan -- that it has been developed into something much more practical than the ideological pronouncements made on the campaign trail.
Thursday, February 26, 2009
Congress: Unconstitutional Laws 'R' Us
Background: The Constitution
The Constitution of the United States is very clear about how the federal governments principal officials are chosen. The Constitution, as amended, requires (1) the direct election of Congress by the people of the several states (House of Representatives described in Art. I §2, and Senate described in Amend. XVII), (2) the election of the President by electors chosen by a formula that mirrors the states' voting weight in Congress (Art. II §1), and provides that the District of Columbia gets to nominate the number of electors it would have were it a state, provided it never has more electors than the least populous state (Amend. XXXIII), and (3) the appointment of members of the Supreme Court by the President with the concurrence of the Senate (Art. II §2). The Constitution clearly establishes that a state is not the same thing as "any place a citizen shall live", however, as it treats the Congress of otherwise limited power as having the authority to "exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States" in the same manner as Congress may govern foreign territories (Art. I §8). The "District" referred to in Art. I §8 of the Constitution is the little square punched out of the Eastern coastline of Virginia, long known as the District of Columbia. The District of Columbia is not among the fifty states, but was ceded to the federal government as a ferderal possession to be retained as a seat of government.
The Present Absurdity
Now, we see President Obama -- who touted on the campaign trail his credentials as a professor of Constitutional Law -- supporting a bill that purports to pretend the District forming the seat of government is a "state" for purposes of obtaining representation in Congress. Let's think about that one for a moment.
Joseph Lieberman, a co-sponsor, pretends that this is somehow appropriate because the District is already treated as a state under some existing federal legislation. This is nonsense. Congress is the sole legislator of the District of Columbia, limited in its power only by the Constitution. What government or privileges persons within the District may enjoy is for Congress to select. Congress is not answerable to the District in any way (short of its answerability in Court should it enact unconstitutional laws), and never has been under the Constitution as written (even as amended). When Congress chooses to oust the District's elected mayor (an election that occurs only because Congress in the late twentieth century provided for such local elections), Congress does not offend any law of the land. To pretend that the District is a separate sovereignty and entitled under the Constitution to select the Congress is daft; to allow the District to participate in the selection of the President required a Constitutional amendment, and so would its further elevation toward statehood. (Or the District could petition Congress to be admitted as a state.)
What Does It Matter?
To have the District of Columbia elect members of Congress is not merely offensive to every state whose voice in Congress is thus diluted; it is offensive to the notion of a government of limited powers described in a Constitution designed to outlive the short lives of its mortal authors. It can hardly be argued that signing into law an unconstitutional bill is a harmless error sure to be caught by the courts, because our lifetime-tenured and apparently illiterate judges are still claiming that the District of Columbia is entitled to immunity to suit under the Eleventh Amendment. Given that the United States Court of Appeals for the First Circuit seems content to ignore that the District of Columbia is not a state and is expressly treated by the Constitution as utterly different than a state (e.g., Congress exercises plenary power there just as on a federally-owned foreign territory), it is evident that laws seeking to accomplish unconstitutional results are in real jeopardy of simply erasing the Constitution.
And who cares? Well, the parts of the Constitution that protect your most important rights are written in the same ink. If those sworn to uphold the Constitution are committed to demonstrating that its ink is not indelible, the instrument is doomed.
The future may afford further opportunity to address President Obama's commitment to the Constitution he swore to defend, but for now he displays fairly good evidence that at minimum does not act like he knows what it says.
So, Mr. President: you can find it here for free.
The Constitution of the United States is very clear about how the federal governments principal officials are chosen. The Constitution, as amended, requires (1) the direct election of Congress by the people of the several states (House of Representatives described in Art. I §2, and Senate described in Amend. XVII), (2) the election of the President by electors chosen by a formula that mirrors the states' voting weight in Congress (Art. II §1), and provides that the District of Columbia gets to nominate the number of electors it would have were it a state, provided it never has more electors than the least populous state (Amend. XXXIII), and (3) the appointment of members of the Supreme Court by the President with the concurrence of the Senate (Art. II §2). The Constitution clearly establishes that a state is not the same thing as "any place a citizen shall live", however, as it treats the Congress of otherwise limited power as having the authority to "exercise exclusive Legislation in all Cases whatsoever, over such District (not exceeding ten Miles square) as may, by Cession of particular States, and the Acceptance of Congress, become the Seat of the Government of the United States" in the same manner as Congress may govern foreign territories (Art. I §8). The "District" referred to in Art. I §8 of the Constitution is the little square punched out of the Eastern coastline of Virginia, long known as the District of Columbia. The District of Columbia is not among the fifty states, but was ceded to the federal government as a ferderal possession to be retained as a seat of government.
The Present Absurdity
Now, we see President Obama -- who touted on the campaign trail his credentials as a professor of Constitutional Law -- supporting a bill that purports to pretend the District forming the seat of government is a "state" for purposes of obtaining representation in Congress. Let's think about that one for a moment.
Joseph Lieberman, a co-sponsor, pretends that this is somehow appropriate because the District is already treated as a state under some existing federal legislation. This is nonsense. Congress is the sole legislator of the District of Columbia, limited in its power only by the Constitution. What government or privileges persons within the District may enjoy is for Congress to select. Congress is not answerable to the District in any way (short of its answerability in Court should it enact unconstitutional laws), and never has been under the Constitution as written (even as amended). When Congress chooses to oust the District's elected mayor (an election that occurs only because Congress in the late twentieth century provided for such local elections), Congress does not offend any law of the land. To pretend that the District is a separate sovereignty and entitled under the Constitution to select the Congress is daft; to allow the District to participate in the selection of the President required a Constitutional amendment, and so would its further elevation toward statehood. (Or the District could petition Congress to be admitted as a state.)
What Does It Matter?
To have the District of Columbia elect members of Congress is not merely offensive to every state whose voice in Congress is thus diluted; it is offensive to the notion of a government of limited powers described in a Constitution designed to outlive the short lives of its mortal authors. It can hardly be argued that signing into law an unconstitutional bill is a harmless error sure to be caught by the courts, because our lifetime-tenured and apparently illiterate judges are still claiming that the District of Columbia is entitled to immunity to suit under the Eleventh Amendment. Given that the United States Court of Appeals for the First Circuit seems content to ignore that the District of Columbia is not a state and is expressly treated by the Constitution as utterly different than a state (e.g., Congress exercises plenary power there just as on a federally-owned foreign territory), it is evident that laws seeking to accomplish unconstitutional results are in real jeopardy of simply erasing the Constitution.
And who cares? Well, the parts of the Constitution that protect your most important rights are written in the same ink. If those sworn to uphold the Constitution are committed to demonstrating that its ink is not indelible, the instrument is doomed.
The future may afford further opportunity to address President Obama's commitment to the Constitution he swore to defend, but for now he displays fairly good evidence that at minimum does not act like he knows what it says.
So, Mr. President: you can find it here for free.
Japan: Global Warming Theory 'Ancient Astrology'
A Japanese advisory board recently published that the manmade climate change theory currently backed by the United Nations' International Panel on Climate Change (IPCC) is just so much hogwash that "has been substituted for truth". Likening the theory to "ancient astrology", the Japanese panel by the vote of 3 of 5 declared the theory apparently bogus, and not subject to proof.
The Earth, which was once rather warmer than it is today, was noted by the Japanese panel not to have been continually increasing in temperature since the 1940s as predicted by the IPCC's hypothesis linking global climate change to human carbon emissions.
Between luddites fighting scientific inquiry and fakers consuming scientific funding while engaged in religious-political-lobbying endeavors (Michael Crichton has some good pieces on this sad topic, notably in a speech to the California Institute of Technology and in testimony before the United States Senate; an interview with Charlie Rose offers an overview for those who don't feel like reading), it's a miracle any science is done with public dollars at all.
Perhaps we should reconsider the terms on which we want government involved in serious policy research. Considering the track record of government in discovering facts in time to avert disasters, I'd say Congress is among the least qualified entities on the planet to allocate resources to such a purpose.
The Earth, which was once rather warmer than it is today, was noted by the Japanese panel not to have been continually increasing in temperature since the 1940s as predicted by the IPCC's hypothesis linking global climate change to human carbon emissions.
Between luddites fighting scientific inquiry and fakers consuming scientific funding while engaged in religious-political-lobbying endeavors (Michael Crichton has some good pieces on this sad topic, notably in a speech to the California Institute of Technology and in testimony before the United States Senate; an interview with Charlie Rose offers an overview for those who don't feel like reading), it's a miracle any science is done with public dollars at all.
Perhaps we should reconsider the terms on which we want government involved in serious policy research. Considering the track record of government in discovering facts in time to avert disasters, I'd say Congress is among the least qualified entities on the planet to allocate resources to such a purpose.
Saturday, February 21, 2009
Iran's Interesting Offer
Iran, which has been mentioned here on more than one occasion, is in the news as having made this proposition to the British: we'll stop killing your soldiers in Iraq if you stop undermining our nuke plans.
This sort of undermines the Iranian claims that they're uninvolved in Iraqi violence, no?
This sort of undermines the Iranian claims that they're uninvolved in Iraqi violence, no?
Wednesday, February 18, 2009
Cowards, eh?
The new Attorney General, confirmed despite apparently approving some foul-smelling last-minute Clinton pardons, says America is a nation of cowards unwilling to discuss race frankly.
Now that I have been invited by the new Attorney General to discuss race frankly, I'm happy to explain that the "cowardice" he sees is in fact the result of years of careful training by bigot-baiters and thin-skinned self-righteous political correctness advocates, which in the aggregate has left quite a few people frankly scared to be targeted for label as evil racist discriminators. People have learned to keep their heads down, even when the prescription for cure for racism is something as distasteful as some of the things that have been called "affirmative action". There is a serious problem with the effort to coddle unhappy members of various racial groups by lowering standards to help beef up percentage representation of those races in employment and education.
The problem can be illustrated anecdotally. Not many years ago I stayed one night in a hotel in the District of Columbia while attending a function in the District. The hotel was, at the time, hosting a law school recruiting conference that drew recruiters from around the country in the hopes of interviewing individuals seeking tenure-track positions as law professors. You couldn't walk without hitting a lawyer, and the elevators were never empty the whole time I was there. It was a high-traffic zone every daylight hour. At one point, I found myself in an elevator with two "white" men.[1] They began discussing their success conducting interviews, and traded notes on what they were looking for. They didn't explain in what fields of law their schools required expertise, or explain what kind of publication record they hoped to find in their recruits. The shopping list was pretty simple. The first one said he needed a black with a pulse. The second said that was his mission, too. I don't know how the whites did at the conference, but I feel pretty sure the black candidates I saw around the hotel had a lot going in their favor.
I have a dream that is deeply rooted in the American dream. I have a dream. I have a dream that one day former quota backers and formerly turned-down-because-they-weren't-the-right-color-to-balance-the-profile-percentages employees will sit down together at the table of brotherhood and merit-based employment practices. I have a dream. I dream that one day organizations will be judged by the content of their output and not the percentages in their racial distribution profiles. I have a dream today. I have a dream that, having become the majority of the population in Harris county and having swept into every level of government and having obtained the highest office in the Nation and having attained positions on the Supreme Court and at the helm of the United States Department of Justice, citizens who believe their ancestors were discriminated against on the basis of their race will believe that the vast and overwhelming majority of voters and employers really prefer quality work output to some kind of warped aesthetic conspiracy that prefers photographs to be filled with similar-colored faces, and just let people hire on merit. I have a dream that one day, this belief will be sufficiently grounded in fact that it won't make people with their eyes open roll them. I have a dream that the non-uniform racial distribution across professions -- like cultural distribution across professions -- will be recognized as a result of factors utterly unrelated to the kind of invidious and intentional racism against which employment equality statutes were erected, and not inspire attacks on every little organization whose racial profile steps out of line with the profile of the nation. I have a dream. I dream that we will work and play with an eye toward the quality of our neighborhoods and the meaning of our professions, and seek excellence for its own sake, and not for a moment consider that someone's race was somehow involved in their recruitment, promotion, retention, or discharge. I have a dream.
But then I wake up.
When I wake up, I see professional members of races thought to be discriminated against -- and Lord knows, they certainly were -- who make their livelihoods by competing against members of other races for elected office, for competitive employment, and the like simply on the basis that their race should be preferred by the involved decisionmakers. I don't want to say that professional blacks are particularly to be noted, because I've seen professional women, professional Asians (if you doubt anti-Asian historical discrimination, let me direct you to the history of the railroad and to the nineteenth-century opinions of the Supreme Court), and others whose chief claim to qualification is their pedigree instead of their personal accomplishments. (Of course, after a few years being a professional _______ (fill in your favorite race/gender/sexual orientation), the fact one has beaten out opponents on the basis of their race (or gender, etc.) creates an illusion of illustrious success, and being a professional member of the class begins to look to the unobservant eye like being a member of any other successful professsional group. The difference is not too hard to spot sometimes when you try to look at their actual personal accomplishments in the various positions held. That, of course, is the acid test.)
So when I hear that Obama was a law school professor for a little while, you have to forgive me if I chuckle. If the recruiters I heard were any reflection of their class, Obama needed only to arrive with a law degree and a pulse. I'm much more interested in what Obama actually does with his legal training than that someone paid him a salary because of it.
What I've seen Obama do with his legal training is to state, in full view of cameras, that Justice Clarence Thomas is the member of the Supreme Court that he would most speedily identify as someone he would not have confirmed. Justice Clarence Thomas has stuck his neck out with a courage only possible because the Supreme Court's members enjoy life tenure, to state in writing where anyone can find it that the Constitution of the United States must be read to mean what it says, and that if we intend changing it we should do it by amending the Constitution rather than by pretending it said something different all along. This view, of course, is the bedrock of a written Constitution, and the only way to enjoy the rule of law subject to one supreme set of governing fundamental principles.
Obama, by contrast, has said that he wants judges who don't just rule on the law but judges who have a heart. Obama doesn't say exactly what that means, but I can tell you what Judge Calabresi said when he spoke in Houston a few years ago, about ruling with heart. He said he was very happy when he woke in the middle of the night with some theory he could sell to a fellow member of the Second Circuit Court of Appeals -- that all he needed was one more justice to get the case to come out the right way -- and he seemed happy to admit he thought about how cases came out as much as he thought about the law. Now, exactly where does that leave us?
As it turns out, Judge Calabresi showed us exactly where that leads.
To Hell With The Law
Judge Calabresi offered his audience a hypothetical. This was before 9/11, mind you. There was no serious threat of cataclysmic terrorist attack, and there was no recent history of systematic torture of enemy combatants for data on national security threats. In the pre-9/11 world, Judge Calabresi asked his audience to imagine this:
Before the Court, an attorney begs for release of his client on the ground that he is being held by officers of the law and subjected to intense and excruciating physical pain while being interrogated. Thereafter, an attorney for the government agrees with the facts: it is true, Your Honor, that the defendant is being held incommunicado and is being subjected to excruciating physical pain, on purpose, while being questioned. However, Your Honor, the defendant has set a nuclear bomb to explode in New York within two hours, and there is no way to evacuate the populace; if we cannot locate the bomb before it detonates, we will lose millions of innocents.
Judge Calabresi left this to hang in the air: imagine New York, its millions unwittingly moving about their lives, with no hope of survival other than through pressure of the defendant to confess -- not to a crime, the confession would be useless in a criminal court due to its method of extraction -- but to confess the location of his instrument of death. Cold chills ran down my spine. There was no legal way to bless what was obviously necessary.
Guido Calabresi, sitting judge of the United States Court of Appeals for the Second Circuit, asked --rhetorically, you understand -- what we, the members of his audience, would do. He observed our stricken faces. But Mr. Calabresi had already figured it out, you see -- exactly how Judge Calabresi would handle the problem, without actually violating the law. He said -- and this is a direct quote, it sticks with me after the years:
This is what we get when we decide that we want a big heart instead of attention to the law: we get people who flout the law to get the results they want. What we need is consistently-applied law, so that we can determine quickly when the law needs to change in order to accomplish justice. This mealy-mouthed "they need a heart" crap is an invitation to judicial activism, prevents legislators from having any idea what will be made of their (admittedly often terrible) work product, and ensures that cases will come out differently on the basis of the salesmanship of attorneys pitching cases as sympathetic rather than having cases come out consistently on the basis of the rule of law, which in principle should be the driving force for justice in a society governed by the rule of law.
If the law is bad, we need to change it. The solution is surely not to have members of the courts simply hand out different results on whim, pretending to apply the law while really following the their whimsical hearts.
Cowardice and the Law
What we need is the courage to stand up to do what is right. We need the courage to identify and eliminate bad law, and the courage to maintain the rule of law even when it seems more convenient to forget all this rule-of-law crap and do our buddies a favor, or let some kindly-looking fraudster off easy because she winked at the court, or what have you. We need to hope like hell that President Obama doesn't get a chance to nominate many to the United States Supreme Court.
The last thing we need is to institutionalize forever the promotion of preference for the employment and promotion of individuals based on the fact their skin looks like the skin of people who, in a prior generation, were loathed because of the color of their skin. We have Asian, African, Native American, and Indian professionals of every stripe. While some professions may attract more Asians and others more Europeans -- for whatever cultural or social reason we may not yet comprehend -- the solution isn't to have less stringently vetted professionals simply so the photo at the annual picnic looks like the photo taken in the local public school, but aged twenty or thirty years. We need quality output much more than we need to coddle people who don't feel "included" enough.
We have more work to do in racial equality, to be sure. This equality will not be advanced by promoting incompetents into positions that will infuriate better-qualified subordinates and ensure that another generation will be taught that members of some races don't belong at the top. To do achieve the laudable objective of genuine equality, we need race-blind advancement, not the supposedly pro-race advancement we've had thrust upon us for so long.
It's time for sanity.
What it's not time for is the decision to ignore the law unless and until it is politically advantageous to enforce it. Who's the real coward? It is not the time to invent doctrines like "heart" to replace good law. If the law is unjust, we should have the courage to amend it and try the new law, not simply begin applying bad law in an arbitrary manner.
That way lies only evil.
====
[1] I am very bad at guessing races. I once worked in an office for months before realizing the principal of the organization identified himself as "black". I'm either an extra-special dufus in such matters, or an example of what Martin Luther King hoped for when he prayed for a race-blind society. Interestingly, I never seem to get any credit for this race-blindness, only chastizement for insensitivity. And here I thought the object was genuine equality, and judgment based on character not skin. Go figure.
Now that I have been invited by the new Attorney General to discuss race frankly, I'm happy to explain that the "cowardice" he sees is in fact the result of years of careful training by bigot-baiters and thin-skinned self-righteous political correctness advocates, which in the aggregate has left quite a few people frankly scared to be targeted for label as evil racist discriminators. People have learned to keep their heads down, even when the prescription for cure for racism is something as distasteful as some of the things that have been called "affirmative action". There is a serious problem with the effort to coddle unhappy members of various racial groups by lowering standards to help beef up percentage representation of those races in employment and education.
The problem can be illustrated anecdotally. Not many years ago I stayed one night in a hotel in the District of Columbia while attending a function in the District. The hotel was, at the time, hosting a law school recruiting conference that drew recruiters from around the country in the hopes of interviewing individuals seeking tenure-track positions as law professors. You couldn't walk without hitting a lawyer, and the elevators were never empty the whole time I was there. It was a high-traffic zone every daylight hour. At one point, I found myself in an elevator with two "white" men.[1] They began discussing their success conducting interviews, and traded notes on what they were looking for. They didn't explain in what fields of law their schools required expertise, or explain what kind of publication record they hoped to find in their recruits. The shopping list was pretty simple. The first one said he needed a black with a pulse. The second said that was his mission, too. I don't know how the whites did at the conference, but I feel pretty sure the black candidates I saw around the hotel had a lot going in their favor.
I have a dream that is deeply rooted in the American dream. I have a dream. I have a dream that one day former quota backers and formerly turned-down-because-they-weren't-the-right-color-to-balance-the-profile-percentages employees will sit down together at the table of brotherhood and merit-based employment practices. I have a dream. I dream that one day organizations will be judged by the content of their output and not the percentages in their racial distribution profiles. I have a dream today. I have a dream that, having become the majority of the population in Harris county and having swept into every level of government and having obtained the highest office in the Nation and having attained positions on the Supreme Court and at the helm of the United States Department of Justice, citizens who believe their ancestors were discriminated against on the basis of their race will believe that the vast and overwhelming majority of voters and employers really prefer quality work output to some kind of warped aesthetic conspiracy that prefers photographs to be filled with similar-colored faces, and just let people hire on merit. I have a dream that one day, this belief will be sufficiently grounded in fact that it won't make people with their eyes open roll them. I have a dream that the non-uniform racial distribution across professions -- like cultural distribution across professions -- will be recognized as a result of factors utterly unrelated to the kind of invidious and intentional racism against which employment equality statutes were erected, and not inspire attacks on every little organization whose racial profile steps out of line with the profile of the nation. I have a dream. I dream that we will work and play with an eye toward the quality of our neighborhoods and the meaning of our professions, and seek excellence for its own sake, and not for a moment consider that someone's race was somehow involved in their recruitment, promotion, retention, or discharge. I have a dream.
But then I wake up.
When I wake up, I see professional members of races thought to be discriminated against -- and Lord knows, they certainly were -- who make their livelihoods by competing against members of other races for elected office, for competitive employment, and the like simply on the basis that their race should be preferred by the involved decisionmakers. I don't want to say that professional blacks are particularly to be noted, because I've seen professional women, professional Asians (if you doubt anti-Asian historical discrimination, let me direct you to the history of the railroad and to the nineteenth-century opinions of the Supreme Court), and others whose chief claim to qualification is their pedigree instead of their personal accomplishments. (Of course, after a few years being a professional _______ (fill in your favorite race/gender/sexual orientation), the fact one has beaten out opponents on the basis of their race (or gender, etc.) creates an illusion of illustrious success, and being a professional member of the class begins to look to the unobservant eye like being a member of any other successful professsional group. The difference is not too hard to spot sometimes when you try to look at their actual personal accomplishments in the various positions held. That, of course, is the acid test.)
So when I hear that Obama was a law school professor for a little while, you have to forgive me if I chuckle. If the recruiters I heard were any reflection of their class, Obama needed only to arrive with a law degree and a pulse. I'm much more interested in what Obama actually does with his legal training than that someone paid him a salary because of it.
What I've seen Obama do with his legal training is to state, in full view of cameras, that Justice Clarence Thomas is the member of the Supreme Court that he would most speedily identify as someone he would not have confirmed. Justice Clarence Thomas has stuck his neck out with a courage only possible because the Supreme Court's members enjoy life tenure, to state in writing where anyone can find it that the Constitution of the United States must be read to mean what it says, and that if we intend changing it we should do it by amending the Constitution rather than by pretending it said something different all along. This view, of course, is the bedrock of a written Constitution, and the only way to enjoy the rule of law subject to one supreme set of governing fundamental principles.
Obama, by contrast, has said that he wants judges who don't just rule on the law but judges who have a heart. Obama doesn't say exactly what that means, but I can tell you what Judge Calabresi said when he spoke in Houston a few years ago, about ruling with heart. He said he was very happy when he woke in the middle of the night with some theory he could sell to a fellow member of the Second Circuit Court of Appeals -- that all he needed was one more justice to get the case to come out the right way -- and he seemed happy to admit he thought about how cases came out as much as he thought about the law. Now, exactly where does that leave us?
As it turns out, Judge Calabresi showed us exactly where that leads.
To Hell With The Law
Judge Calabresi offered his audience a hypothetical. This was before 9/11, mind you. There was no serious threat of cataclysmic terrorist attack, and there was no recent history of systematic torture of enemy combatants for data on national security threats. In the pre-9/11 world, Judge Calabresi asked his audience to imagine this:
Before the Court, an attorney begs for release of his client on the ground that he is being held by officers of the law and subjected to intense and excruciating physical pain while being interrogated. Thereafter, an attorney for the government agrees with the facts: it is true, Your Honor, that the defendant is being held incommunicado and is being subjected to excruciating physical pain, on purpose, while being questioned. However, Your Honor, the defendant has set a nuclear bomb to explode in New York within two hours, and there is no way to evacuate the populace; if we cannot locate the bomb before it detonates, we will lose millions of innocents.
Judge Calabresi left this to hang in the air: imagine New York, its millions unwittingly moving about their lives, with no hope of survival other than through pressure of the defendant to confess -- not to a crime, the confession would be useless in a criminal court due to its method of extraction -- but to confess the location of his instrument of death. Cold chills ran down my spine. There was no legal way to bless what was obviously necessary.
Guido Calabresi, sitting judge of the United States Court of Appeals for the Second Circuit, asked --rhetorically, you understand -- what we, the members of his audience, would do. He observed our stricken faces. But Mr. Calabresi had already figured it out, you see -- exactly how Judge Calabresi would handle the problem, without actually violating the law. He said -- and this is a direct quote, it sticks with me after the years:
"I would call a recess."Judge Calabresi would not say he was allowing the torture, but on the facts as he described them, including the outright admission of torture, he would not order it stopped. Judge Calabresi said he'd put off ruling on it until the government was done with the torture, in which case either (a) the victim would be vaporized with New York, or (b) New York would be saved, and the plea for injunctive relief mooted by the cessation of the torture. (This was before Judge Calabresi was publicly admonished for comparing Bush to Hitler in a speech given to an event connected with the American Constitution Society.)
This is what we get when we decide that we want a big heart instead of attention to the law: we get people who flout the law to get the results they want. What we need is consistently-applied law, so that we can determine quickly when the law needs to change in order to accomplish justice. This mealy-mouthed "they need a heart" crap is an invitation to judicial activism, prevents legislators from having any idea what will be made of their (admittedly often terrible) work product, and ensures that cases will come out differently on the basis of the salesmanship of attorneys pitching cases as sympathetic rather than having cases come out consistently on the basis of the rule of law, which in principle should be the driving force for justice in a society governed by the rule of law.
If the law is bad, we need to change it. The solution is surely not to have members of the courts simply hand out different results on whim, pretending to apply the law while really following the their whimsical hearts.
Cowardice and the Law
What we need is the courage to stand up to do what is right. We need the courage to identify and eliminate bad law, and the courage to maintain the rule of law even when it seems more convenient to forget all this rule-of-law crap and do our buddies a favor, or let some kindly-looking fraudster off easy because she winked at the court, or what have you. We need to hope like hell that President Obama doesn't get a chance to nominate many to the United States Supreme Court.
The last thing we need is to institutionalize forever the promotion of preference for the employment and promotion of individuals based on the fact their skin looks like the skin of people who, in a prior generation, were loathed because of the color of their skin. We have Asian, African, Native American, and Indian professionals of every stripe. While some professions may attract more Asians and others more Europeans -- for whatever cultural or social reason we may not yet comprehend -- the solution isn't to have less stringently vetted professionals simply so the photo at the annual picnic looks like the photo taken in the local public school, but aged twenty or thirty years. We need quality output much more than we need to coddle people who don't feel "included" enough.
We have more work to do in racial equality, to be sure. This equality will not be advanced by promoting incompetents into positions that will infuriate better-qualified subordinates and ensure that another generation will be taught that members of some races don't belong at the top. To do achieve the laudable objective of genuine equality, we need race-blind advancement, not the supposedly pro-race advancement we've had thrust upon us for so long.
It's time for sanity.
What it's not time for is the decision to ignore the law unless and until it is politically advantageous to enforce it. Who's the real coward? It is not the time to invent doctrines like "heart" to replace good law. If the law is unjust, we should have the courage to amend it and try the new law, not simply begin applying bad law in an arbitrary manner.
That way lies only evil.
====
[1] I am very bad at guessing races. I once worked in an office for months before realizing the principal of the organization identified himself as "black". I'm either an extra-special dufus in such matters, or an example of what Martin Luther King hoped for when he prayed for a race-blind society. Interestingly, I never seem to get any credit for this race-blindness, only chastizement for insensitivity. And here I thought the object was genuine equality, and judgment based on character not skin. Go figure.
Tuesday, February 17, 2009
Tons of Hamas-Guarded Bombs Go Missing
The title pretty much says it all. Exactly from whom was Hamas expected to guard the explosives? Wasn't Hamas the biggest potential at-risk consumer in the first place?
Crazy.
Crazy.
Saturday, February 14, 2009
GM: Bankruptcy Looking Likelier
General Motors' talks with its labor union have broken down over GM's obligation to pay $20B (yes, that's a B and not an M) in connection with retirees' health benefits. That's not the pension payments, mind you -- that's health care benefits for those on pensions. No wonder the UAW wanted the government to lend GM money last year.
GM's obligations to suppliers and the union impact GM's flexibility to restructure operations. In particular, collectively-bargained labor contracts specify job titles with sufficient detail to preclude GM from implementing cross-training programs, and bar programs in which managers would participate with laborers in quality circle production schemes on the theory that managers' power to do what union members might do would undermine the assurance that labor would be performed by union members. In short, GM has been barred for decades from implementing Deming-style quality assurance concepts that its Japanese competitors mastered during the second half of the last century. A look at recent recalls suggests that US manufactorers are overrepresented, and that Japanese manufacturers are overwhelmingly underrepresented.
American workers are highly motivated and skilled and creative. Artificially classifying them according to World War Two era job titles and setting them loose in plants in which they can't take turns with managers at the machines that make the place run is a recipe for (a) managers who never learn how the work is really done (and thus can't manage with any particular depth of understanding), and (b) employees who aren't allowed to understand the whole product being made (and thus can't contribute meaningfully to the product's development or improvement). In an ideal world, feedback systems would connect assembly personnel to engineers so that improvements could quickly be implemented and quality improved and overhead reduced. The existing system ensures that this is utterly impossible. It's a crime against the principle of free competition to shackle both the employees and the employers into such a scheme. Contract avoidance in bankruptcy might offer some help in this regard, assuming that GM still wants to build cars and its employees still want to help build them.
It's clear that something drastic is needed to enable GM, and its American competitors, to become competitive after years of declining global and domestic sales share. The question is whether it's now too late.
GM's obligations to suppliers and the union impact GM's flexibility to restructure operations. In particular, collectively-bargained labor contracts specify job titles with sufficient detail to preclude GM from implementing cross-training programs, and bar programs in which managers would participate with laborers in quality circle production schemes on the theory that managers' power to do what union members might do would undermine the assurance that labor would be performed by union members. In short, GM has been barred for decades from implementing Deming-style quality assurance concepts that its Japanese competitors mastered during the second half of the last century. A look at recent recalls suggests that US manufactorers are overrepresented, and that Japanese manufacturers are overwhelmingly underrepresented.
American workers are highly motivated and skilled and creative. Artificially classifying them according to World War Two era job titles and setting them loose in plants in which they can't take turns with managers at the machines that make the place run is a recipe for (a) managers who never learn how the work is really done (and thus can't manage with any particular depth of understanding), and (b) employees who aren't allowed to understand the whole product being made (and thus can't contribute meaningfully to the product's development or improvement). In an ideal world, feedback systems would connect assembly personnel to engineers so that improvements could quickly be implemented and quality improved and overhead reduced. The existing system ensures that this is utterly impossible. It's a crime against the principle of free competition to shackle both the employees and the employers into such a scheme. Contract avoidance in bankruptcy might offer some help in this regard, assuming that GM still wants to build cars and its employees still want to help build them.
It's clear that something drastic is needed to enable GM, and its American competitors, to become competitive after years of declining global and domestic sales share. The question is whether it's now too late.
Illinois as Diogenes: Any Honest Men Left?
Today, we learn that despite the impeachment testimony that helped support Roland Burris' Senate confirmation, Gov. Blagojevich's controversial nomination (made while under impeachment) of Obama's successor to the U.S. Senate seat the governor had recently attempted to sell to the highest bidder wasn't completely unconnected to any solicitation of funds. It turns out that Blagojevich's brother had asked for a campaign contribution.
And Burris lied to conceal this before he was confirmed in the seat.
Burris might have been innocent before the testimony, but the fact he was willing to lie under oath about it raises a serious question about whether there's anyone left in Illinois politics that isn't corrupt. No wonder the state fears the population to the point of wanting to disarm the electorate! (I assume this is the ultimately-intended purpose is behind the activity noted here and here.) If found out, authors and enforcers of Illinois' laws likely expect to be tarred and feathered ....
And Burris lied to conceal this before he was confirmed in the seat.
Burris might have been innocent before the testimony, but the fact he was willing to lie under oath about it raises a serious question about whether there's anyone left in Illinois politics that isn't corrupt. No wonder the state fears the population to the point of wanting to disarm the electorate! (I assume this is the ultimately-intended purpose is behind the activity noted here and here.) If found out, authors and enforcers of Illinois' laws likely expect to be tarred and feathered ....
Monday, February 9, 2009
All That Is Gold Does Not Glitter: Paper Money and Regulation of Commerce
Where Will Stimulus Money Come From And What Will It Cost
We know the answer is not "from 2009 taxpayers" because the tax rates aren't going up; the stimulus package contains tax cuts. I don't trade bonds, but I have been wondering who is going to lend the U.S. government an "extra" trillion bucks for the expected 2009 deficit. I have been thinking the answer is Treasury will print a lot of it, but I don't know how Congress works out which bills will be borrowed and which bills will be printed. If the money is to be borrowed, expect to see more and more of your taxes consumed in interest payments: as government must borrow more and more from lenders less and less excited about lending (perhaps, out of concern for inflation), government will be paying more and more for those loans.
Controlling Currency Value With Fixed Exchange Standards
Interestingly, I heard an allegation that a major foreign currency was being toyed with by its overseers as a possible candidate for going back onto a gold standard. Frankly, I think that would be a nutty thing to do (will you spend government resources accumulating gold, or building infrastructure?), and deflationary (over time, as gold becomes more dear, it will get harder and harder to print new gold-backed bills to keep up with the growth in the economy, meaning that more people will be sharing the same nearly-fixed fund of currency), meaning that risking currency on a business venture would seem less attractive than in an inflationary environment (in which one hopes not to hold pure cash very long, because it is a deteriorating asset in an inflationary environment). Thus, I think the hope of attracting foreign investment and currency-purchasing by going onto a gold standard would be countered by the tendency to hold and not invest deflationary currencies. In short, moving to a gold standard would slow the circulation of money and harm the economy depending on the currency.
Maybe moving to a potable-water standard makes sense (especially in the desert, where it'd be particularly valuable) -- you can, after all, replace it with some work -- but going to a standard that requires taking useful industrial metals out of circulation is nuts. And think how you will move an existing currency onto the gold standard: every time you print a new bill with which to buy gold, you are digging yourself deeper into the need to buy more gold. This can only work if your purpose is to establish the gold standard at a price considerably lower than current prices, so that the government can print a lot of cash and, after inflation, still have a currency value similar to the value of the underlying gold. The problem with this is, of course, that the moment it becomes public that you intend to double your current volume of outstanding paper money (which you'd need to do to back all the existing bills: you'd buy gold with all the new bills, and end up with a currency backed with gold at half the value of the currency you had when you started), everyone will know how inflationary this is and will bail on the currency. The currency's value will drop to half before you finish buying your gold.
(Note: as described here, currency backed by gold might not really mean anything except in an ad campaign; the wealth of the economy is not based in bills printed by the government (and subject to backing with gold), but in funds created in the process of issuing credit to loan customers. The banking system predominating in the world ensures inevitably that more money is "owned" -- not just in paper bills, but as predominantly occurs, in electronically-managed account balances at financial institutions -- than can possibly ever be presented to claimants. While paper bills may be backed by gold, very little of the money in a modern economy exists in the form of paper bills. The fractional reserve banking system ensures that a gold standard capable of surviving a run is logically impossible. But that requires thinking.)
Why We Will Not See A New Gold Standard (according to me)
So (just for example) backing the Euro with gold at €2,000.00 per ounce would require the folks who print Euros to be buy enough gold to back the entire circulating volume of currency in one of the world's largest markets, which would have the effect of driving the value of the Euro down until it was very close to €2,000.00 per ounce (assuming they could do it in secret, so others didn't devalue the currency rushing out of it ahead of them). And then, what benefit do you have? The value of everyone's Euros has been diluted by about half, so your voters and taxpayers and wage earners aren't happy. The prospect for printing more Euros is poor after the gold standard has been announced, because it will require acquiring more gold (and now we know why Mercantilist governments were so oppressive in their dealings abroad: they were trying to maintain gold-backed currencies during a time of rapid economic growth), so euro holders and users will face the prospect of deflation as population growth drives up demand per outstanding Euro. Long-term deflationary trends will be easy to understand, so people will not want to borrow in Euros if they can help it (they will be paying back money that is worth more than at the time they borrowed it) and they will not want to invest Euros in equities (which places at risk capital that otherwise would appreciate just sitting there). Yes, interest rates might be low -- because inflation risk is low -- but how quickly will this economy grow?
By contrast, there are tremendous growth opportunities in volatile-currency countries that haven't got a gold or silver standard. People seeking high rates of return may prefer to go someplace the public's investment has made commerce easier, instead of simply gaming the value of the currency. Imagine a country with a low incidence of armed thieves attacking transits along the roads and waterways; where taxes are known in advance; where intra-market borders are essentially irrelevant because they can be crossed by anyone without presentation of taxes, passports, or import/export documents even if you are not a citizen of one of the states in the market; where with knowledge of only one or two languages you can access hundreds of millions of buyers/sellers; where millions of households are created each year; where the ease with which one is allowed to discharge employees in tough times makes it an easy decision to hire people when it's necessary to ramp up production or service capacity; and where the government has the world's longest-running track record for making good on debt obligations, even extending to honoring debts incurred funding the revolution that established the government. Just imagine you could do business in a fantasy-land like this.
Why would you go someplace else first for business?
Multiple-Currency Vendors
Last point: Assume the purpose of moving to a gold standard is to attract foreign purchase of the currency, thus to attract investment. Before the movement of Europe to the Euro, I visited a little town in Austria. There, one could find shops (heck, even ice cream sandwich vendors on foot, now that I recall it) that would accept Austrian shilling, or German marks, or even United States dollars -- at a rate posted on a piece of paper by the cash register (or recited by the vendor on foot). The fact that a particular visitor had only marks or dollars wasn't a problem; the store would happily do business (and make change). Presumably, the store gave change in your preferred currency and only had to exchange its net transactions.
Today -- the era of computerized cash registers and automated inventory control -- multiple currency points of sale are a no-brainer to put into service, even if you want to have currencies change daily and reflect stores' potential exchange costs. "Oh, you want to pay in pesos? It's right there on the screen, with the exchange rate. What's that? Prefer renminbi?" This begs the question, I think, whether in an era of credit cards and automatic instantaneous currency conversion it even matters in what currency your own accounts are denominated.
If the world's lenders were to become excited about some new gold-backed currency arrangement in another major market, there's no barrier that I can think of to stores accepting orders in the new currency, making change in the new currency, and so on. People borrow and repay obligations in several currencies already, and there's no reason that the new currency (with its associated interest rates) would not be immediately useful in any market on the planet. Heck, it'd probably give rise to another revolution in financial services, in which brokerage firms would offer foreign-currency accounts and handle exchanges much more cheaply than is currently offered by U.S. banks. On the other hand, if actual cash neede to change hands a lot, one might find U.S. banks offering better foreign-currency services.
The More Things Change ...
But probably not. A new gold-backed currency would not be exploding in numbers of circulating bills, for the reasons discussed above. Lack of availabilty would drive people, in fact, to other currencies over time. On the bright side, a gold standard might force European governments to treat their taxpayers' money as if valuable and begin spending less of it, but maybe that's wishful thinking. The enormous cultural divide between American levels of government oversight and European and Indian levels of entanglement of government into every level of personal and professional enterprise renders the two virtually uncomparable, and it would be foolish to try to preduct how deflationary pressures would impact E.U. spending policies.
A Little Musing On Government In America
Recently, I read District of Columbia v. Heller (the opinion, not just the syllabus or a third-party discussion of it), and it was interesting to see the two sides of the debate try to make an argument in their favor the amount of time we've seen pass between the adoption of the Second Amendment and the first case that actually discussed what it meant to individual rights. Scalia mentioned other rights expressed in the Bill of Rights that were first explained by the Court in the twentieth century and said, essentially, that until we had a case we naturally didn't have a decision.
And why is it, you think, that the Supreme Court hasn't been called on to speak on the Second Amendment with more clarity in the last couple of centiries?
Over a century ago, in Champion v. Ames, the United States Supreme Court first held Congress had the power under the Commerce Clause to ban an article of commerce simply because Congress didn't like the idea of people trading the article. In Champion v. Ames, the article in question was lottery tickets. The logic in Champion v. Ames wasn't the "it might in the aggrete have a substantial effect on interstate commerce" reasoning we've since seen from the Supreme Court (as lambasted by Thomas in his concurrence in United States v. Lopez). Instead, the logic in Champion v. Ames was that the Court had upheld a similar law in Phalen v. Virginia, thus the path was clear to uphold this law, too if Congress felt like passing it.
The problem with Phalen v. Virginia was that it was not a case about Congress passing legislation under a grant of power to the federal government in the Commerce Clause. Phalen v. Virginia was about whether the state of Virginia had the power to regulate morals by banning an ostensibly noxious class of business from operating in its borders. The issue in Phalen wasn't whether Virginia had the power to regulate morals (the longstanding rule is that this is part of the general police power of a state, and supports things like making bigamy a felony, outlawing prostitution, refusing to enforce wagering contracts, and making it illegal to use narcotics recreationally); the issue in Phalen v. Virginia was whether Virginia, having set up a lottery commission to raise funds, somehow violated the Constitution's prescription against state laws impairing the obligation of contract when it later banned all lotteries in Virginia.
States do not get their power from the Commerce Clause, and the logic that would support or limit state regulatory power has nothing to do with the logic that would uphold an Act of Congress as within its constitutional power. Maybe if Congress passed a law that said diseased cattle, because they endanger commerce itself, cannot be sold in interstate commerce, then Congress would regulate commerce. Merely deciding that cannibis or Kalashnikovs are offensive doesn't seem to offer the Commerce Clause much power to prevent Congress from assuming a general police power of the sort intentionally denied Congress when the Constitution was drafted and adopted.
Since the Commerce Clause's migration into a general police power appears to have originated in a case that mistakes Commerce Clause analysis for an analysis of whether a state law is appropriate under its police power, we should be completely unsurprised that the law has developed as it did. Champion v. Ames was obviously decided wrongly, as it applied to Congress the reasoning properly applied to morals leglslation by a state.
The reason we're learning (just in recent decades) more about what the Constitution means is that -- a century after Champion v. Ames -- Congress is now fully persuaded that is has the power to wield a general police power and is passing laws accordingly. (On the radio last week, I heard a member of the House of Representatives -- not Texas' but the one in D.C. -- explaining how she was intruducing a bill to regulate service contracts between local utility providers and their customers during weather emergencies. Under what authority, pray tell, would Congress do that?) Because Congress is now attempting to involve itself in fields and subjects that would never have possibly occurred to any judge might be lawful a hundred and fifty years ago, it's clear we'll see more and more cases explaining why the exercise of a police power (though masquerading as the power to "regulate commerce") might still be limited because it also violates amendments restricting Congress within the powers its authors thought limited.
Because Congress under Champion v. Ames (and its numerous progeny) has in effect a general police power, we will also see the only truly secured rights in this country become the rights expressly identified in the amendments to the United States Constitution, which Madison didn't think required the amendments because the activities that offend most of the rights aren't within Congress' power to begin with. The Ninth Amendment (which states that the expression of certain rights shall not disparage others retained by the people) will be interesting to watch as Congress proceeds toward a general regulatory monopole in the federal government.
The upshot?
The United States may turn into an overregulated India-style socialist bureaucracy in which private enterprise is in effect run by government officials permitting every breath taken by private enterprise. This, not currency issues, will be the end of American competitiveness.
We know the answer is not "from 2009 taxpayers" because the tax rates aren't going up; the stimulus package contains tax cuts. I don't trade bonds, but I have been wondering who is going to lend the U.S. government an "extra" trillion bucks for the expected 2009 deficit. I have been thinking the answer is Treasury will print a lot of it, but I don't know how Congress works out which bills will be borrowed and which bills will be printed. If the money is to be borrowed, expect to see more and more of your taxes consumed in interest payments: as government must borrow more and more from lenders less and less excited about lending (perhaps, out of concern for inflation), government will be paying more and more for those loans.
Controlling Currency Value With Fixed Exchange Standards
Interestingly, I heard an allegation that a major foreign currency was being toyed with by its overseers as a possible candidate for going back onto a gold standard. Frankly, I think that would be a nutty thing to do (will you spend government resources accumulating gold, or building infrastructure?), and deflationary (over time, as gold becomes more dear, it will get harder and harder to print new gold-backed bills to keep up with the growth in the economy, meaning that more people will be sharing the same nearly-fixed fund of currency), meaning that risking currency on a business venture would seem less attractive than in an inflationary environment (in which one hopes not to hold pure cash very long, because it is a deteriorating asset in an inflationary environment). Thus, I think the hope of attracting foreign investment and currency-purchasing by going onto a gold standard would be countered by the tendency to hold and not invest deflationary currencies. In short, moving to a gold standard would slow the circulation of money and harm the economy depending on the currency.
Maybe moving to a potable-water standard makes sense (especially in the desert, where it'd be particularly valuable) -- you can, after all, replace it with some work -- but going to a standard that requires taking useful industrial metals out of circulation is nuts. And think how you will move an existing currency onto the gold standard: every time you print a new bill with which to buy gold, you are digging yourself deeper into the need to buy more gold. This can only work if your purpose is to establish the gold standard at a price considerably lower than current prices, so that the government can print a lot of cash and, after inflation, still have a currency value similar to the value of the underlying gold. The problem with this is, of course, that the moment it becomes public that you intend to double your current volume of outstanding paper money (which you'd need to do to back all the existing bills: you'd buy gold with all the new bills, and end up with a currency backed with gold at half the value of the currency you had when you started), everyone will know how inflationary this is and will bail on the currency. The currency's value will drop to half before you finish buying your gold.
(Note: as described here, currency backed by gold might not really mean anything except in an ad campaign; the wealth of the economy is not based in bills printed by the government (and subject to backing with gold), but in funds created in the process of issuing credit to loan customers. The banking system predominating in the world ensures inevitably that more money is "owned" -- not just in paper bills, but as predominantly occurs, in electronically-managed account balances at financial institutions -- than can possibly ever be presented to claimants. While paper bills may be backed by gold, very little of the money in a modern economy exists in the form of paper bills. The fractional reserve banking system ensures that a gold standard capable of surviving a run is logically impossible. But that requires thinking.)
Why We Will Not See A New Gold Standard (according to me)
So (just for example) backing the Euro with gold at €2,000.00 per ounce would require the folks who print Euros to be buy enough gold to back the entire circulating volume of currency in one of the world's largest markets, which would have the effect of driving the value of the Euro down until it was very close to €2,000.00 per ounce (assuming they could do it in secret, so others didn't devalue the currency rushing out of it ahead of them). And then, what benefit do you have? The value of everyone's Euros has been diluted by about half, so your voters and taxpayers and wage earners aren't happy. The prospect for printing more Euros is poor after the gold standard has been announced, because it will require acquiring more gold (and now we know why Mercantilist governments were so oppressive in their dealings abroad: they were trying to maintain gold-backed currencies during a time of rapid economic growth), so euro holders and users will face the prospect of deflation as population growth drives up demand per outstanding Euro. Long-term deflationary trends will be easy to understand, so people will not want to borrow in Euros if they can help it (they will be paying back money that is worth more than at the time they borrowed it) and they will not want to invest Euros in equities (which places at risk capital that otherwise would appreciate just sitting there). Yes, interest rates might be low -- because inflation risk is low -- but how quickly will this economy grow?
By contrast, there are tremendous growth opportunities in volatile-currency countries that haven't got a gold or silver standard. People seeking high rates of return may prefer to go someplace the public's investment has made commerce easier, instead of simply gaming the value of the currency. Imagine a country with a low incidence of armed thieves attacking transits along the roads and waterways; where taxes are known in advance; where intra-market borders are essentially irrelevant because they can be crossed by anyone without presentation of taxes, passports, or import/export documents even if you are not a citizen of one of the states in the market; where with knowledge of only one or two languages you can access hundreds of millions of buyers/sellers; where millions of households are created each year; where the ease with which one is allowed to discharge employees in tough times makes it an easy decision to hire people when it's necessary to ramp up production or service capacity; and where the government has the world's longest-running track record for making good on debt obligations, even extending to honoring debts incurred funding the revolution that established the government. Just imagine you could do business in a fantasy-land like this.
Why would you go someplace else first for business?
Multiple-Currency Vendors
Last point: Assume the purpose of moving to a gold standard is to attract foreign purchase of the currency, thus to attract investment. Before the movement of Europe to the Euro, I visited a little town in Austria. There, one could find shops (heck, even ice cream sandwich vendors on foot, now that I recall it) that would accept Austrian shilling, or German marks, or even United States dollars -- at a rate posted on a piece of paper by the cash register (or recited by the vendor on foot). The fact that a particular visitor had only marks or dollars wasn't a problem; the store would happily do business (and make change). Presumably, the store gave change in your preferred currency and only had to exchange its net transactions.
Today -- the era of computerized cash registers and automated inventory control -- multiple currency points of sale are a no-brainer to put into service, even if you want to have currencies change daily and reflect stores' potential exchange costs. "Oh, you want to pay in pesos? It's right there on the screen, with the exchange rate. What's that? Prefer renminbi?" This begs the question, I think, whether in an era of credit cards and automatic instantaneous currency conversion it even matters in what currency your own accounts are denominated.
If the world's lenders were to become excited about some new gold-backed currency arrangement in another major market, there's no barrier that I can think of to stores accepting orders in the new currency, making change in the new currency, and so on. People borrow and repay obligations in several currencies already, and there's no reason that the new currency (with its associated interest rates) would not be immediately useful in any market on the planet. Heck, it'd probably give rise to another revolution in financial services, in which brokerage firms would offer foreign-currency accounts and handle exchanges much more cheaply than is currently offered by U.S. banks. On the other hand, if actual cash neede to change hands a lot, one might find U.S. banks offering better foreign-currency services.
The More Things Change ...
But probably not. A new gold-backed currency would not be exploding in numbers of circulating bills, for the reasons discussed above. Lack of availabilty would drive people, in fact, to other currencies over time. On the bright side, a gold standard might force European governments to treat their taxpayers' money as if valuable and begin spending less of it, but maybe that's wishful thinking. The enormous cultural divide between American levels of government oversight and European and Indian levels of entanglement of government into every level of personal and professional enterprise renders the two virtually uncomparable, and it would be foolish to try to preduct how deflationary pressures would impact E.U. spending policies.
A Little Musing On Government In America
Recently, I read District of Columbia v. Heller (the opinion, not just the syllabus or a third-party discussion of it), and it was interesting to see the two sides of the debate try to make an argument in their favor the amount of time we've seen pass between the adoption of the Second Amendment and the first case that actually discussed what it meant to individual rights. Scalia mentioned other rights expressed in the Bill of Rights that were first explained by the Court in the twentieth century and said, essentially, that until we had a case we naturally didn't have a decision.
And why is it, you think, that the Supreme Court hasn't been called on to speak on the Second Amendment with more clarity in the last couple of centiries?
Over a century ago, in Champion v. Ames, the United States Supreme Court first held Congress had the power under the Commerce Clause to ban an article of commerce simply because Congress didn't like the idea of people trading the article. In Champion v. Ames, the article in question was lottery tickets. The logic in Champion v. Ames wasn't the "it might in the aggrete have a substantial effect on interstate commerce" reasoning we've since seen from the Supreme Court (as lambasted by Thomas in his concurrence in United States v. Lopez). Instead, the logic in Champion v. Ames was that the Court had upheld a similar law in Phalen v. Virginia, thus the path was clear to uphold this law, too if Congress felt like passing it.
The problem with Phalen v. Virginia was that it was not a case about Congress passing legislation under a grant of power to the federal government in the Commerce Clause. Phalen v. Virginia was about whether the state of Virginia had the power to regulate morals by banning an ostensibly noxious class of business from operating in its borders. The issue in Phalen wasn't whether Virginia had the power to regulate morals (the longstanding rule is that this is part of the general police power of a state, and supports things like making bigamy a felony, outlawing prostitution, refusing to enforce wagering contracts, and making it illegal to use narcotics recreationally); the issue in Phalen v. Virginia was whether Virginia, having set up a lottery commission to raise funds, somehow violated the Constitution's prescription against state laws impairing the obligation of contract when it later banned all lotteries in Virginia.
States do not get their power from the Commerce Clause, and the logic that would support or limit state regulatory power has nothing to do with the logic that would uphold an Act of Congress as within its constitutional power. Maybe if Congress passed a law that said diseased cattle, because they endanger commerce itself, cannot be sold in interstate commerce, then Congress would regulate commerce. Merely deciding that cannibis or Kalashnikovs are offensive doesn't seem to offer the Commerce Clause much power to prevent Congress from assuming a general police power of the sort intentionally denied Congress when the Constitution was drafted and adopted.
Since the Commerce Clause's migration into a general police power appears to have originated in a case that mistakes Commerce Clause analysis for an analysis of whether a state law is appropriate under its police power, we should be completely unsurprised that the law has developed as it did. Champion v. Ames was obviously decided wrongly, as it applied to Congress the reasoning properly applied to morals leglslation by a state.
The reason we're learning (just in recent decades) more about what the Constitution means is that -- a century after Champion v. Ames -- Congress is now fully persuaded that is has the power to wield a general police power and is passing laws accordingly. (On the radio last week, I heard a member of the House of Representatives -- not Texas' but the one in D.C. -- explaining how she was intruducing a bill to regulate service contracts between local utility providers and their customers during weather emergencies. Under what authority, pray tell, would Congress do that?) Because Congress is now attempting to involve itself in fields and subjects that would never have possibly occurred to any judge might be lawful a hundred and fifty years ago, it's clear we'll see more and more cases explaining why the exercise of a police power (though masquerading as the power to "regulate commerce") might still be limited because it also violates amendments restricting Congress within the powers its authors thought limited.
Because Congress under Champion v. Ames (and its numerous progeny) has in effect a general police power, we will also see the only truly secured rights in this country become the rights expressly identified in the amendments to the United States Constitution, which Madison didn't think required the amendments because the activities that offend most of the rights aren't within Congress' power to begin with. The Ninth Amendment (which states that the expression of certain rights shall not disparage others retained by the people) will be interesting to watch as Congress proceeds toward a general regulatory monopole in the federal government.
The upshot?
The United States may turn into an overregulated India-style socialist bureaucracy in which private enterprise is in effect run by government officials permitting every breath taken by private enterprise. This, not currency issues, will be the end of American competitiveness.
Friday, February 6, 2009
Hanks Had It Right The First Time
Hanks, exercising his Constitutional right of free speech, blasted members of a major U.S. religion who supported "Proposition 8" -- a successful effort in California to codify into law the prevailing discrimination against homosexuals by barring them from acquiring for their intimate relationships the same legal protections afforded non-homosexuals.
The basic idea of marriage -- even the marriage of an infertile couple, which is legal everywhere marriage is otherwise legal -- is that certain protections are given. Typically, a spouse can give consent to medical procedures when the other is incapacitated, inherits some property by default in the absence of a will, can share the legal protection afforded a homestead owned by either spouse, and so on. Some homosexuals have children from prior non-homosexual marriage, and children raised primarily in such households might benefit from their other effective parent being afforded the legal right to give consent for educational and medical issues.
Proposition 8 is lawful; the United States Supreme Court has not declared sexual orientation to lie among the especially protected classifications like religion or race, and defining marriage to discriminate against homosexuals does not offend current notions of nationally-guaranteed rights. However, the fact that something is legal does not make it good. The fact that "gay" and "faggot" are ordinarily considered unmistakable insults in middle-school locker rooms is unlikely to be ameliorated by laws that cement ongoing discrimination.
Homosexuality may not be your bag, but think about it this way: for every pair of gay men allowed to live together without aid of a beard, you get two unmarried women available for dating. And what straight man doesn't have fond thoughts about lesbian chicks? And getting back to the law, the United States Supreme Court has made it crystal clear that states haven't got any legitimate interest in the voluntary sexual practices of competent, consenting, adults who aren't sent to the hospital by their games. So let's be serious: who is their conduct hurting?
Tom Hanks, duly chastized by Mormons who point out that speaking your mind is always American, has published what has been publicly taken for an apology. And it is always American to speak our minds, crazy as our minds may be. But Tom had it right the first time. Speaking for Proposition 8 might not be un-American, but favoring it in the first place may require more hate and divisiveness than leaves room for American-ness in one's heart. Undermining individual liberty and the equality of every free person is hardly American, and after the 13th Amendment, we're all supposed to be free, so we should all be equal before the law. So it's not un-American to speak your mind, but it can be un-American to want to preach hate in the first place.
Government doesn't give married couples a cash bonus, and government goesn't pay for marriages. It costs the public nothing to let people live their gay lives in peace. It just rubs raw the pride of bigots.
Are we really such bigots?
The basic idea of marriage -- even the marriage of an infertile couple, which is legal everywhere marriage is otherwise legal -- is that certain protections are given. Typically, a spouse can give consent to medical procedures when the other is incapacitated, inherits some property by default in the absence of a will, can share the legal protection afforded a homestead owned by either spouse, and so on. Some homosexuals have children from prior non-homosexual marriage, and children raised primarily in such households might benefit from their other effective parent being afforded the legal right to give consent for educational and medical issues.
Proposition 8 is lawful; the United States Supreme Court has not declared sexual orientation to lie among the especially protected classifications like religion or race, and defining marriage to discriminate against homosexuals does not offend current notions of nationally-guaranteed rights. However, the fact that something is legal does not make it good. The fact that "gay" and "faggot" are ordinarily considered unmistakable insults in middle-school locker rooms is unlikely to be ameliorated by laws that cement ongoing discrimination.
Homosexuality may not be your bag, but think about it this way: for every pair of gay men allowed to live together without aid of a beard, you get two unmarried women available for dating. And what straight man doesn't have fond thoughts about lesbian chicks? And getting back to the law, the United States Supreme Court has made it crystal clear that states haven't got any legitimate interest in the voluntary sexual practices of competent, consenting, adults who aren't sent to the hospital by their games. So let's be serious: who is their conduct hurting?
Tom Hanks, duly chastized by Mormons who point out that speaking your mind is always American, has published what has been publicly taken for an apology. And it is always American to speak our minds, crazy as our minds may be. But Tom had it right the first time. Speaking for Proposition 8 might not be un-American, but favoring it in the first place may require more hate and divisiveness than leaves room for American-ness in one's heart. Undermining individual liberty and the equality of every free person is hardly American, and after the 13th Amendment, we're all supposed to be free, so we should all be equal before the law. So it's not un-American to speak your mind, but it can be un-American to want to preach hate in the first place.
Government doesn't give married couples a cash bonus, and government goesn't pay for marriages. It costs the public nothing to let people live their gay lives in peace. It just rubs raw the pride of bigots.
Are we really such bigots?
Golbal Cooling? Earth Apparently Once Rather Warmer
According to calculations made on the basis of an enormous monster snake fossil found near the equator in Columbia, the Earth where the fossil was found was once 10ºF warmer. All reptiles in the rain forest were apparently much larger than comparable current reptiles.
Without bothering to calculate how far from the equator the find was at the time its occupant was alive, and what impact that might have on the global temperature differences (if Columbia was then further from the equator, the global temperature might have been even more different), it seems the Earth's typical temperature might have been significantly warmer. According to Jonathan Bloch, "[t]he result was, among other things, the largest snakes the world has ever seen...and hopefully ever will."
One question that comes to mind is whether the corals we currently have, which appear so sensitive to warming of their immediate environment, had not yet developed at the time the monster snake lived.
Interesting, no?
I wonder if the snakes picketed against global cooling ....
Without bothering to calculate how far from the equator the find was at the time its occupant was alive, and what impact that might have on the global temperature differences (if Columbia was then further from the equator, the global temperature might have been even more different), it seems the Earth's typical temperature might have been significantly warmer. According to Jonathan Bloch, "[t]he result was, among other things, the largest snakes the world has ever seen...and hopefully ever will."
One question that comes to mind is whether the corals we currently have, which appear so sensitive to warming of their immediate environment, had not yet developed at the time the monster snake lived.
Interesting, no?
I wonder if the snakes picketed against global cooling ....
ACAS Solicits Proxies Even Harder
I was informed by an ACAS investor (it was my fault, I explained what a good deal the company's shares were) that someone had called to solicit her proxy to vote at the upcoming special meeting. They really want a quorum, apparently.
As argued here, if you don't plan approving ACAS' move to issue shares below NAV to enable transactions like the previously-announced ECAS privatization, you should just sell your shares to someone who thinks ACAS' management should be entrusted to make the deals that presumably made ACAS a buy in the first place. Holding ACAS shares once you no longer trust management makes no sense.
From my perspective, I've already fallen 19 of 20 stories, what's the extra ten feet going to do to me? I haven't anything to lose but more money, right? [NOTE: This is a joke, not a safety tip!]
More seriously, though, the ECAS transaction -- though requiring issuance below NAV -- actually increases NAV due to the fact that ECAS' accounting treatment will change. Since ACAS' issues with its creditors are primarily caused by the effects of accounting principles, this kind of gaming of accounting pronciples seems entirely according to Hoyle. Moreover, since ACAS has a history of trading above NAV and ECAS has a history of trading consistently below NAV, the deal is good for shareholders of both ECAS and ACAS. Presumably, once the panic is past, ACAS will be valued with some rational relation to its NAV and/or its NOI, and those who enter at these levels will win.
This assumes that (a) management is authorized to enter the kinds of distress deals that will create NAV improvement as the market panic resolves, (b) ACAS isn't killed by creditor issues due to tangible asset threshold problems, and (c) the NOI ACAS has been enjoying doesn't evaporate, but is a real stream of ongoing income. If management isn't authorized to do things to protect ACAS' asset levels and is sold piecemeal in bankruptcy to meet creditors' immediate demands for principal repayment, shareholders will get zippo. If you plan holding, you need to authorize the deals that will prevent this and vote for the first proposition on the ballot.
Incidentally, the vote may create a trading opportunity: onlookers who don't consider the specific transactions underway will surely conclude that below-NAV issuance is dilutive (since they will assume the issuance is for cash rather than assets whose value will be different in ACAS' hands than on the street) and pronounce ACAS a sell. In other words, if you like ACAS at these prices, wait a little bit and they may get better still :-)
Also, the depression hasn't really kicked fully in: people are still losing jobs, and those lost jobs will impact public consumption in ways that ripple broadly through the economy. We could see improved prices in ACAS, BRK.B, and lots of other good, internally-diversified tickers with good long-term income. Considering the valuation the market is placing on AAPL, the world is apparently expecting bleak things in the near future.
As argued here, if you don't plan approving ACAS' move to issue shares below NAV to enable transactions like the previously-announced ECAS privatization, you should just sell your shares to someone who thinks ACAS' management should be entrusted to make the deals that presumably made ACAS a buy in the first place. Holding ACAS shares once you no longer trust management makes no sense.
From my perspective, I've already fallen 19 of 20 stories, what's the extra ten feet going to do to me? I haven't anything to lose but more money, right? [NOTE: This is a joke, not a safety tip!]
More seriously, though, the ECAS transaction -- though requiring issuance below NAV -- actually increases NAV due to the fact that ECAS' accounting treatment will change. Since ACAS' issues with its creditors are primarily caused by the effects of accounting principles, this kind of gaming of accounting pronciples seems entirely according to Hoyle. Moreover, since ACAS has a history of trading above NAV and ECAS has a history of trading consistently below NAV, the deal is good for shareholders of both ECAS and ACAS. Presumably, once the panic is past, ACAS will be valued with some rational relation to its NAV and/or its NOI, and those who enter at these levels will win.
This assumes that (a) management is authorized to enter the kinds of distress deals that will create NAV improvement as the market panic resolves, (b) ACAS isn't killed by creditor issues due to tangible asset threshold problems, and (c) the NOI ACAS has been enjoying doesn't evaporate, but is a real stream of ongoing income. If management isn't authorized to do things to protect ACAS' asset levels and is sold piecemeal in bankruptcy to meet creditors' immediate demands for principal repayment, shareholders will get zippo. If you plan holding, you need to authorize the deals that will prevent this and vote for the first proposition on the ballot.
Incidentally, the vote may create a trading opportunity: onlookers who don't consider the specific transactions underway will surely conclude that below-NAV issuance is dilutive (since they will assume the issuance is for cash rather than assets whose value will be different in ACAS' hands than on the street) and pronounce ACAS a sell. In other words, if you like ACAS at these prices, wait a little bit and they may get better still :-)
Also, the depression hasn't really kicked fully in: people are still losing jobs, and those lost jobs will impact public consumption in ways that ripple broadly through the economy. We could see improved prices in ACAS, BRK.B, and lots of other good, internally-diversified tickers with good long-term income. Considering the valuation the market is placing on AAPL, the world is apparently expecting bleak things in the near future.
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