Same diff

Ace of Spades recently linked to a Michael Crichton speech. One line stood out for me, independent of the topic of the talk:

… the frantic fantasies that people have about one political party or another ... miss the cold truth---that there is very little difference between the parties, except a difference in pandering rhetoric.

I would have disputed that until recently, arguing that the Republican Party was far from perfect but was much better for the country than the Democrats. Now, however, the Republican Party's decision to push amnesty for illegal aliens has convinced me of the truth of Crichton's statement.

Shame the Devil

On October 12, America's Health Insurance Plans, a trade association for the health insurance industry, released a report they had commissioned from PricewaterhouseCoopers. This report (pdf here) examined the Senate Finance Committee health care/insurance reform proposal (the Baucus bill) and concluded:

There are four provisions included in the Senate Finance Committee proposal that could increase private health insurance premiums above the levels projected under current law:

- Insurance market reforms coupled with a weak coverage requirement,
- A new tax on high-cost health care plans,
- Cost-shifting as a result of cuts to Medicare, and
- New taxes on several health care sectors.

The overall impact of these provisions will be to increase the cost of private insurance coverage for individuals, families, and businesses above what these costs would be in the absence of reform.

The report caused such a stir that President Obama used his weekly radio address, entitled Taking the Insurance Companies on Down the Stretch, to attack health insurance companies. The New York Times described Obama’s speech quite bluntly (emphasis mine):

President Obama mounted a frontal assault on the insurance industry on Saturday, accusing it of using “deceptive and dishonest ads” to derail his health care legislation and threatening to strip the industry of its longstanding exemption from federal antitrust laws.

In response to Obama’s address, Megan McArdle has up two excellent posts about the threatened use of government regulatory powers to punish AHIP for publishing the PwC report. In the first, McArdle makes a vital - and often forgotten - distinction between the Constitutional idea of freedom of the press and our current tendency to think that freedom applies only to those who call themselves journalists (emphasis hers):

Freedom of the press was not a right accorded to the profession of journalism ... Presses were owned by individuals, who engaged in all manner of speech, commercial and non. Freedom of the press was not the freedom to own a newspaper or magazine, and say what you wanted therein. It was the freedom to disseminate written speech.

She points out that those who think the Obama Administration doing this to the insurance companies is a good idea would probably be less enthusiastic if a Republican Administration engaged - or threatened to engage - in similar regulatory endeavors that targeted George Soros’ finances. Or would it be okay, she asks, for a Republican Administration to:

openly declare that if unions didn't stop issuing reports in favor of a higher minimum wage, the administration would have to revisit Taft-Hartley?

Her conclusion seems to me to be inescapable:

... I am very sure that changes in the laws should never be wielded as weapons to punish speech that politicians don't like.

Apparently it’s not as inescapable as I thought. The comments to her post make it crystal clear that a significant number of people are perfectly happy to have our government threaten unpopular industry groups to get them to shut up. McArdle must have been as surprised as I was to see this since she put up a second post in which she attempts again to make her point:

But it is not okay for the administration to say, "If you publish a report saying that our plan will make premiums go up, we will use our regulatory authority in an entirely different matter to punish you." I don't see how that's much different from saying, "If journalists criticize the administration, we will use our commercial speech authority to undercut your ad revenue".

Again there were a lot of commenters who saw nothing wrong with Obama’s threats. They raised all kinds of interesting points about the nature of freedom of the press and free speech and to what extent those apply to associations or corporations. They discussed whether the anti-trust exemption for the insurance industry is a “favor” the government has every right to take away. They even debated whether the insurance companies’ anti-trust exemption helps or hurts competition. In other words, they totally missed the point. Which is pretty simple:

The government should not threaten citizens who publish reports - or run ads or make speeches or send out mailings - that disagree with, criticize, or question the government’s claims.

It really doesn’t matter to me if those who disagree are individuals, political parties, journalists, or trade associations. It doesn’t matter to me if a Philadelphia lawyer could make a case that what Obama and Congress are doing is technically legal. It doesn’t matter to me if every word in the report, ad, speech, or mailing is an outright lie. What matters is that the government should not be threatening to use its regulatory power to silence its critics. This is - or at least should be - intolerable. It’s one thing for the government to decide that the insurance companies’ anti-trust exemption does not serve the national interest and should be revoked; it’s quite another for the government to decide that the insurance companies’ anti-trust exemption makes a handy stick with which to beat the industry to compel its silence. The former is governance; the latter is extortion.

Reading Obama’s comments on the insurance companies reminds me of nothing so much as George W Bush’ comments on the War on Terror. In Obama’s world though it’s the insurance companies who are America’s “evil and ... determined enemy.” It’s the “aggressions and ambitions of the wicked [insurance companies that] must be opposed early, decisively, and collectively, before they threaten us all.” It’s the insurance companies that “would be a threat to every nation and, eventually, to civilization itself.” Obama is “determined to fight this evil, and fight until we're rid of it.” He’s “got a job to do, and that's to explain to the American people the truth.” Bush’s truth was that “we're now facing a new threat”; that of Islamic terrorism; Obama’s truth is that we’re facing the old, old threat of the insurance companies:

The history is clear: for decades rising health care costs have unleashed havoc on families, businesses, and the economy. And for decades, whenever we have tried to reform the system, the insurance companies have done everything in their considerable power to stop us.

Still Obama has “made clear to America, that this great country will not let evil stand.” “We are [near the end] of what I view as a very long struggle against evil.” However this “is not the time to grow complacent” because “America faces an evil and a determined enemy.” Rather “[n]ow is the time to draw the line in the sand against the evil ones.” And just as Bush was confident “good will prevail” so is Obama: “I believe we can. I believe we will.”

The difference is that Bush was demonizing a foreign entity that violently attacked the United States; Obama is demonizing American companies owned and run by American citizens. Bush wanted to mobilize us to fight an outside enemy so he could prevent further attacks; Obama wants to mobilize us to fight each other to so he can achieve a political goal.

And it’s not just the insurance companies. The lengths to which Obama is willing to go to silence them is unprecedented* but the basic message is not new. I’m astonished at how often this Administration has badmouthed its own people. It is not the job of the national government to explain to me that American trade association members and American family doctors and American corporate executives and American small government ralliers and American television employees and American talk show hosts are bad, bad people and I should not trust them or listen to anything they say.

On the other hand, it may well be that the current Administration is not actually running a national government. Rather it’s running a political campaign which unfortunately has the power of the national government behind it. Even worse it may not know there's a difference.

*****

* That whole pitchfork thing was a threat that government would fail to protect the bankers from attack rather than that government itself would attack them.

In the mail

I got an “Application For Vote by Mail Ballot” in the mail today. If I sign it and mail it in, my County Clerk will mail me a Mail-In Ballot for the upcoming election - New Jersey is voting for Governor soon. The Application came from the New Jersey Democratic State Committee and to make absolutely certain I know who my benefactor is, the Application has a full page color ad attached. It features President Barack Obama urging me to:

Vote from home and keep the change going.

Support President Obama by voting for New Jersey Democrats this year and New Jersey Democrats in Congress next year.

To make sure there’s no confusion, the ad helpfully includes the names of the Democrats I’m supposed to vote for next year. I don’t know if it was delicacy or law that kept them from urging me directly to vote for Democrat Jon Corzine for Governor next month. I suspect the latter.

Even without Corzine’s name I don’t much like the ad and I wouldn’t like it any better if the Application and the ad had come from the Republicans instead. This is a bit too much like a notice on the door of my voting booth that reads: “This voting machine proudly sponsored by the Democratic Party which urges you to show your appreciation for our help by voting for our guys.”

The Application already has my name and address filled in; has checked off that I want a ballot for the General election; and has the following information in the Assistor section:

Arthur Warner
1409 Francis Drive
Wall, NJ 07719-4459

The Application also has Mr. Warner’s signature - it doesn’t look like it was actually signed by an actual pen. I weirds me out that the disembodied Mr. Warner is helping me fill this out without my even asking. I wonder if in his spare time he helps little old ladies cross streets they’d prefer not to. Mr. Warner did leave a few sections blank however. For example, he didn’t fill in the section that lets me have my Mail-In Ballot sent to an address other than the one where I’m registered to vote.

Now, I don’t object to people voting by mail. I’ve done it a time or two back when it was called an “Absentee Ballot” and I understand that if a voter is ill or doesn’t drive or has a long commute or has small children it can be very difficult - even impossible - to get to the polls. I also gather there are some people who want to vote by mail to avoid the new voting machines. I don’t blame them - I miss the old “pull the lever, hear the ka-chunk, and the curtain flies open” ones myself. In my heart of hearts I’d rather that people only vote by mail when they have a good reason - there is something to be said for giving weight to the preferences of citizens who make the effort to show up - but I know that can be a sticky wicket. You end up with arguments over how long your commute has to be in order to qualify and so on. So allowing everyone to vote by mail is something I can live with.

I can even live with allowing people to apply by mail for a Mail-In Ballot. I’d rather they have to go to their Town Hall at least once to prove it’s really them asking to vote by mail; getting them there seems like a good project for voting drive type organizations. Still I can understand that if you’re an invalid, for example, it’s no easier to get to Town Hall than it is to get to your polling place so I can - very reluctantly - live with applying by mail for a Mail-In Ballot without so much as a trip to Town Hall to ask for the Application.

However, letting people apply by mail to have their Mail-In Ballot mailed somewhere other than the address where they’re registered to vote seems like a perfect setup for fraud.* What keeps some unscrupulous someone from applying for a Mail-In Ballot for me and having it sent to him? Sure he’s taking a risk but given the low turnout in many elections and the fact that anyone who reads Frederick Forsyth knows about accommodation addresses, it’s not much of a risk. Even if I show up at the polls and raise Cain, it’s unlikely the unscrupulous someone will be tracked down.

The Application’s provision allowing a Mail-In Ballot to be mailed to a different address is particularly odd since the section about using an Authorized Messenger to deliver an Application and pick up a Mail-In Ballot is rather strict:

Any voter may apply for a Mail-In Ballot by Authorized Messenger. Messenger shall be a family member of a registered voter of this County. No Authorized Messenger can (1) be a Candidate in the election for which the voter is requesting a Mail-In Ballot or (2) serve as messenger for more then TEN qualified voters per election.

The form goes on to say:

Authorized Messenger must sign application and show photo ID in the presence of the County Clerk or County Clerk designee.

Above the signature line for the Authorized Messenger is this promise:

“I do hereby certify that I will deliver the Mail-In Ballot directly to the voter and no other person, under penalty of law.”

Clearly the powers that be are worried sick that some unscrupulous someone will waltz into the County Clerk’s office with eleven falsified Applications and gather up eleven Mail-In Ballots for his own nefarious purposes. Apparently, however, if some unscrupulous someone is clever enough to mail in a thousand falsified Applications and have those thousand Mail-In Ballots mailed to him rather than to the voters who should get them, the powers that be don’t much care. Maybe this is some kind of voting intelligence test: if the guy collecting Mail-In Ballots in other people’s names is smart enough to hide his identity by having the ballots mailed to him instead of being stupid enough to show up in person to collect them, he’s smart enough to vote as many times as he wants.

It should be an interesting election.

*****

* I know there needs to be some provision for military personnel but surely that’s what notarized signatures are for.

Make it so

In an essay about Barack Obama’s May 21 remarks on national security, Byron York says:

It’s often said that Obama is learning what it means to be commander in chief, now that he bears the burden of the nation’s security. Governing, it is said, is different from campaigning. But do you really believe Obama didn’t know what was involved in closing Guantanamo back when he was giving all those campaign speeches? It is simply not credible to argue that Obama, during the campaign, didn’t know that our foreign allies would not take Gitmo prisoners, didn’t know that transferring them to our domestic prisons would involve significant risks and didn’t know that American communities would not welcome terrorists as neighbors.

I’m sure that Obama was aware of all the difficulties York lists and understood quite well that they made closing Guantanamo difficult - perhaps impossible - for the Bush Administration. However, I’m also sure that Obama believed those difficulties would not be problems for him: he was certain the Guantanamo situation would resolve itself as he wanted it to when he decreed that it would do so.

I first put my interpretation of this belief on Obama’s part into words as a comment in response to TigerHawk wondering what on earth Obama could be thinking in proposing his new tax structure for overseas profits. The more I see Obama in action the more accurate I think my interpretation is so - for future reference - here’s a self-citation:

Obama believes the world will arrange itself as he wants. I know there are people out there speculating that he has some type of narcissistic disorder or something but I think his belief is based partly on his conviction that he himself is Good with a very capital “G” and partly on past experience. Heaven knows he’s had millions of people telling him he’s practically the Second Coming and I imagine that his combination of intelligence (however facile); symbolism; and charm (although it’s lost on me) have generally meant much of the world *has* arranged itself as he wants.

Thus Obama believes corporations not paying lots and lots of taxes is Bad and he therefore is going to tax them. He assumes our allies will want to do whatever they can to help him and it never occurs to him that they may react badly to one of his policies.

There’s been a pattern of this: Closing Guantanamo is Good and the issue of what to do with the prisoners there will simply resolve itself. Trashing big financial institutions is Good and it never occurs to Obama that those same institutions may not thereafter be champing at the bit to go into business with the government in the PPIPs. Stress-testing the banks is Good and it never occurs to anyone that if banks “fail” there may be a crisis of confidence; surely if Obama says “All is well” everyone will believe him. Releasing the OLC memos is Good and Obama seemed to assume he could then just say, “And now we’re done with that” and everyone would say, “Good job, glad that’s over with.”

This is actually pretty funny when you consider that the term “reality-based community” comes from an account a reporter gave of his discussion with a Bush aide:

The aide said that guys like me were "in what we call the reality-based community," which he defined as people who "believe that solutions emerge from your judicious study of discernible reality." ... "That's not the way the world really works anymore," he continued. "We're an empire now, and when we act, we create our own reality. And while you're studying that reality—judiciously, as you will—we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors…and you, all of you, will be left to just study what we do."

The hubris of an Administration that believed it could create the reality it wants is nothing compared to the hubris of a President who believes the rest of the world will create the reality he wants.

In the case of Guantanamo, however, the rest of the world did not respond as desired to his hand-waving, make it so approach. That is, no host nations sprang forward to take the terrorists off his hands; the Congress had the temerity to ask for a detailed plan before providing the funds for Obama to do as he saw fit with the prisoners. So now Obama has been forced to make “remarks” and propose an actual plan. Or, more accurately, a plan for a plan: he’s told us more about what he’s going to do but he still hasn’t actually told us exactly how he’s going to do it.

I have fewer objections to Obama’s remarks than many other commenters on the right and the left. There were some odd elements such as Obama insisting that some Republicans wanted Guantanamo closed and that Guantanamo had done more harm than good. Those references belong in an environment where closing Guantanamo is not a done deal, where people need to be convinced about this decision. Maybe this is just more evidence that Obama cannot get out of campaign mode but it seems, well, odd.

It’s also odd that went out of his way to emphasize this:

Meanwhile, over 525 detainees were released from Guantanamo under not my administration, under the previous administration. Let me repeat that: Two-thirds of the detainees were released before I took office and ordered the closure of Guantanamo.

I’m not sure what point Obama is trying to make. Perhaps he’s saying that since Bush released prisoners there’s no reason for him not to do so. Perhaps he’s saying that those unlikely to be dangerous have already been released but that seems an unlikely point from a man who wants to close Guantanamo. Perhaps he’s simply trying to argue that there are so few people left, no one should care if they all get out. Again, it’s odd - and perplexing.

The Bush-bashing is unnecessary of course and I wonder if it’s beginning to be counter-productive. Imagine if Obama had simply said that the previous Administration took actions that seemed reasonable to them but that he, Obama, disagrees and believes we are better served by trying something else. In fact, if Obama was half as smart as people think, he should go further than that. He should be saying that because of the former administration’s unceasing efforts to keep us safe, the country is now in a position to close Guantanamo. That would take a lot of the wind out of Dick Cheney’s sails - although it would also make it harder for Obama to insist Guantanamo is “a mess”, a characterization which will serve as a nice cover if closing it doesn’t go smoothly.

Once you get past those problems, though, Obama is trying to establish a set of procedures for dealing with the prisoners at Guantanamo that goes beyond just looking them up until the President says they can go. I applaud this effort but I don’t think he’s been very successful - and in my darker moments I think it’s because there simply may not be a better system given the situation we’re in.

The heart of Obama’s speech is his division of the inmates at Guantanamo into five groups (Gallia est omnis divisa in partes tres...):

1) Try some in criminal court.

2) Try some via revamped military commissions.

3) Release the ones the court has said must be released. This is where it gets interesting: where are we going to release them? Are we going to put them back where we found them? Open the gates at Guantanamo and let them wander out? Find foreign hosts? Or - and this is the $64,000 question - are we going to release them into the United States? Obama didn’t say.

This situation is complicated by the fact that it is against the law. to admit to the United States “any alien who has received terrorist training or has belonged to an organization that promotes terrorism — against anyone.” I don’t think the sheer fact of illegality would deter this Administration but the law will do nicely for nervous Congressmen who don’t want to let prisoners live in their districts but need legal cover for their refusal to arrange things as Obama wants.

4) Send some overseas. Obama says his administration “is in ongoing discussions with a number of other countries about the transfer of detainees to their soil for detention and rehabilitation.” Here again Obama is relying on others to order the world as he desires. It will be interesting to see if they comply - and if so, what their price is.

5) Keep some indefinitely without trial. This is the Bush policy but Obama wants to make it more legal by establishing Congressional and judicial oversight of the executive’s decision to hold onto the prisoners. Ace of Spades has outlined the Constitutional issue with trying to create “legal” indefinite retention and argues the Bush’ system is more justifiable than the one Obama is trying to create. I’m very much afraid that he is correct.

At the same time, Obama’s review process is almost certainly meaningless: if the President says the country needs to hold onto someone because he’s a terrible threat, what Congressman is going to oppose him and take the risk of being the person who released the next Osama bin Laden? Even when so many Democrats were screaming that Guantanamo was another Bush disaster, I suspect it would have been well nigh impossible to find a member of Congress willing to actually take responsibiity for turning any of the prisoners loose. (Depending on how Obama structures this - there’s that lack of detail again - the judicial part may be more interesting.) Obama will be able to go right on doing what Bush was doing while looking like he’s not.

I’m not sure if this makes Obama smarter than Bush or just less honest. I am sure it makes me a lot more nervous.

Mommy, what does the Vice-President do?

I was looking for the full “Hardball” interview with Representative Michele Bachmann and while searching YouTube I found an interview Chris Matthews did with Bill Maher on October 21. Matthews began by asking Maher about Bachmann but before Maher could get his entire answer out, Matthews said

Can I cue you up another one? Here’s something fresh from today, fresh from the world of 2008 politics. This is the Vice-Presidential nominee of the Republican Party talking about her notion of what the Vice-Presidency holds for her.

He then proceeded to play a clip of an interview Governor Palin did with station KUSA in Colorado. Here’s a transcript of the clip Matthews played:

A Vice-President has a really great job because not only are they there to support the President’s agenda - they’re like the team member, the teammate to that President - but also they’re in charge of the United States Senate so if they want to they can really get in there with the Senators and make a lot of good policy changes what will help make life better.

Matthews and Maher then had the following exchange (I’ve omitted the disbelieving nasal sounds):

Matthews: Wow! I heard this begin during the debate when her notion of the Vice-Presidency is she’s gonna run the United States Senate. I thought it was a formality to just break ties and sit up there. She says she’s gonna basically be in charge of the Senate, she’s gonna get through good policies, she’s gonna get in there and work. I guess she has to take a look at the Constitution before she, well, at least takes office.

Maher: Well that would involve reading, Chris. I wouldn’t hold your breath on that. I was just gonna say before you showed the second clip is what I’ve been hearing about this Congresswoman is that she’s the only person in public office who’s actually dumber than Palin but I don’t know. After I heard that clip that you just showed me, that’s a tossup. That’s a real Beavis and Butthead we’ve got there.

I got curious and did some poking around and found the Palin interview with KUSA on October 20, 2008, which runs 8 minutes and 13 seconds.. (Warning: Make sure your sound is turned OFF when you start this. There’s a brief ad before the interview that is nothing but incredibly loud static. Turn the sound back on when Palin appears.)

After watching the whole interview, I can report there are two problems with M&M’s take on Palin’s remarks. One is Constitutional, the other is contextual. Let’s take the Constitutional problem first.

The Constitution mentions the Vice-President in Article I which defines the Legislative branch of government and in Article II which defines the Executive branch of government. For our purposes, we need only be concerned with Article I. In Section 3 of this Article, we find the following:

The Vice President of the United States shall be President of the Senate, but shall have no Vote, unless they be equally divided.

The Senate shall chuse their other Officers, and also a President pro tempore, in the Absence of the Vice President, or when he shall exercise the Office of President of the United States.

As you can see, Palin was Constitutionally correct in saying the Vice-President is “in charge of the United States Senate.” During the Twentieth Century the involvement of the Vice-President in the normal activities of the Senate has waned but I don’t see any reason why the Vice-President could not - if she wanted to - “get in there with the Senators”. She would not be able to vote or debate but as anyone who has tried to get work done in a committee or meeting knows, the person who runs things can wield a lot of power if he - or she - so chooses.

Do modern Vice-Presidents mix it up with the Senate? No. According to the Senate Website:

The first two vice presidents, Adams and Jefferson, did much to shape the nature of the office, setting precedents that were followed by others. During most of the nineteenth century, the degree of influence and the role played within the Senate depended chiefly on the personality and inclinations of the individual involved. Some had great parliamentary skill and presided well, while others found the task boring, were incapable of maintaining order, or chose to spend most of their time away from Washington, leaving the duty to a president pro tempore. Some made an effort to preside fairly, while others used their position to promote the political agenda of the administration.

During the twentieth century, the role of the vice president has evolved into more of an executive branch position. Now, the vice president is usually seen as an integral part of a president's administration and presides over the Senate only on ceremonial occasions or when a tie-breaking vote may be needed. Yet, even though the nature of the job has changed, it is still greatly affected by the personality and skills of the individual incumbent.

So while Palin is Constitutionally correct in her description of the Vice-President’s role in the Senate, as a practical matter the extensive involvement she envisions is rarely seen these days. I see no Constitutional reason why she could not involve herself as much as nineteenth century Vice-Presidents did but I imagine the Senators themselves would dislike that very much and their dislike would make life more difficult for a McCain administration.

Certainly, M&M could have used the “impractical” argument to make what Palin said sound ridiculous. They would have had to figure out a way to avoid making the Senators sound unconstitutional while making Palin sound like Mr. Smith Goes To Washington but I’m sure they could have managed it. Since they chose to use the “she needs to read the Constitution” argument instead, I can only assume they are far more clueless about the Constitution than Sarah Palin.

As long as we’re on the subject, let’s look at what was actually said in the Vice-Presidential debate, a forum that Matthews pinpointed as the beginning of what he apparently believes are Palin’s grandiose notions about the role of the Vice-President. Based on the New York Times transcript of this debate, the discussion of the role of the Vice-President begins when the moderator, Gwen Ifill, says, “But tell us now, looking forward, what it is you think the vice presidency is worth now.” Palin and Biden do a little back and forth about joking and then:

PALIN: No, no. Of course, we know what a vice president does. And that's not only to preside over the Senate and will take that position very seriously also. I'm thankful the Constitution would allow a bit more authority given to the vice president if that vice president so chose to exert it in working with the Senate and making sure that we are supportive of the president's policies and making sure too that our president understands what our strengths are. John McCain and I have had good conversations about where I would lead with his agenda. That is energy independence in America and reform of government over all, and then working with families of children with special needs. That's near and dear to my heart also. In those arenas, John McCain has already tapped me and said, that's where I want you, I want you to lead. I said, I can't wait to get and there go to work with you.

IFILL: Senator?

BIDEN: Gwen, I hope we'll get back to education because I don't know any government program that John is supporting, not early education, more money for it. The reason No Child Left Behind was left behind, the money was left behind, we didn't fund it. We can get back to that I assume.

With regard to the role of vice president, I had a long talk, as I'm sure the governor did with her principal, in my case with Barack. Let me tell you what Barack asked me to do. I have a history of getting things done in the United States Senate. John McCain would acknowledge that. My record shows that on controversial issues. I would be the point person for the legislative initiatives in the United States Congress for our administration. I would also, when asked if I wanted a portfolio, my response was, no. But Barack Obama indicated to me he wanted me with him to help him govern. So every major decision he'll be making, I'll be sitting in the room to give my best advice. He's president, not me, I'll give my best advice.

And one of the things he said early on when he was choosing, he said he picked someone who had an independent judgment and wouldn't be afraid to tell him if he disagreed. That is sort of my reputation, as you know. I look forward to working with Barack and playing a very constructive role in his presidency, bringing about the kind of change this country needs.

So when Sarah Palin speaks of “working with the Senate and making sure that we are supportive of the president's policies” she’s out of line but when Joe Biden says “I have a history of getting things done in the United States Senate. ... I would be the point person for the legislative initiatives in the United States Congress for our administration” M&M presumably have no problem with that. Personally, I don’t see a dime’s worth of difference between the intentions of the two candidates. Palin may intend to try to use her role as President of the Senate to accomplish what Biden would probably accomplish via personal contacts and, well, schmoozing, but the desired outcome is the same. Each plans to be the President’s liaison with the Senate.

The debate discussion continues immediately with (emphasis mine):

IFILL: Governor, you mentioned a moment ago the constitution might give the vice president more power than it has in the past. Do you believe as Vice President Cheney does, that the Executive Branch does not hold complete sway over the office of the vice presidency, that it it is also a member of the Legislative Branch?

PALIN: Well, our founding fathers were very wise there in allowing through the Constitution much flexibility there in the office of the vice president. And we will do what is best for the American people in tapping into that position and ushering in an agenda that is supportive and cooperative with the president's agenda in that position. Yeah, so I do agree with him that we have a lot of flexibility in there, and we'll do what we have to do to administer very appropriately the plans that are needed for this nation. And it is my executive experience that is partly to be attributed to my pick as V.P. with McCain, not only as a governor, but earlier on as a mayor, as an oil and gas regulator, as a business owner. It is those years of experience on an executive level that will be put to good use in the White House also.

IFILL: Vice President Cheney's interpretation of the vice presidency?

BIDEN: Vice President Cheney has been the most dangerous vice president we've had probably in American history. The idea he doesn't realize that Article I of the Constitution defines the role of the vice president of the United States, that's the Executive Branch. He works in the Executive Branch. He should understand that. Everyone should understand that.

And the primary role of the vice president of the United States of America is to support the president of the United States of America, give that president his or her best judgment when sought, and as vice president, to preside over the Senate, only in a time when in fact there's a tie vote. The Constitution is explicit.

The only authority the vice president has from the legislative standpoint is the vote, only when there is a tie vote. He has no authority relative to the Congress. The idea he's part of the Legislative Branch is a bizarre notion invented by Cheney to aggrandize the power of a unitary executive and look where it has gotten us. It has been very dangerous.

Oops! Let’s see how many errors we can ring up in Biden’s comments:

1) Article I defines only part of the role of the Vice-President, not all of it.

2) Article I defines the Legislative branch not the Executive branch.

3) The Vice-President has Constitutional duties in both the Legislative and Executive branches.

4) Constitutionally, the Vice-President can preside over the Senate whenever he or she darn well pleases.

5) Constitutionally, the Vice-President has as much authority over Congress (at least the Senate) as he or she chooses to exert. I simply don’t see any way the Senate could refuse to let the Vice-President run things if she showed up, gavel in hand, to do so.

6) The idea that the Vice-President is part of the Legislative branch is a bizarre notion invented not by Dick Cheney but by the Framers of the Constitution. Silly unitary power aggrandizers.

Call me cynical but I’m willing to bet a fair sum of money that M&M never had a little chuckle-fest over Biden’s understanding of the Constitution.

Okay, enough of the Constitutional problem with M&M’s tete-a-tete. On to the contextual problem.

Actually, there are two contextual problems, one immediate and one overarching. The immediate one is that the clip Matthews played is, shall we say, abbreviated. The whole exchange between the interviewer and Palin took about 45 seconds; Matthews played about 18 seconds worth. Here’s the whole exchange:

Interviewer: Finally, Governor, we’ve been trying to engage some local grade schoolers the last few elections cycles. We do have a few more questions from the third grade.

Palin: Good.

Interviewer: Brandon Garcia wants to know, “What does the Vice President do?”

Palin: Aw, that’s something that Piper would ask me as a second grader, also. That’s a great question, Brandon. And a Vice-President has a really great job because not only are they there to support the President’s agenda - they’re like the team member, the teammate to that President - but also they’re in charge of the United States Senate so if they want to they can really get in there with the Senators and make a lot of good policy changes what will make life better for Brandon and his family and his classroom. And it’s a great job and I look forward to having that job.

Now Governor Palin sounds just a tiny bit simplistic in the clip Matthews played and her affect is definitely kind of cheery, for lack of a better word. Once you realize she is in effect talking to a ten-year old, though, she sounds more like a mommy than a lightweight.

The overarching context is this: the entire interview was just over eight minutes long. The 45-second exchange Matthews carved up and ran came at the very end of the interview. This would seem to mean that someone must have sat through the entire interview to find this little segment. Surely that someone could have found something newsworthy in Palin’s answer to the following questions:

1) Are you ready?

2) Are you surprised at the intensity with which some have gone after you?

3) Why should a voter who is struggling economically put his trust in you?

4) The First Lady of Colorado supports a tax increase to help children with autism, Down syndrome, and similar issues. Do you support that?

5) What Democrats would be a good fit for a McCain/Palin administration?

6) Why isn’t there more comment about oil shale extraction?

7) Is there such a thing as clean coal?

Palin was at least as impressive as Biden is in similar interviews. She knew her facts and marshaled them well. In fact, throughout the interview Sarah Palin was - if I may plagiarize Joe Biden - "articulate and bright and clean and ... nice-looking.” (Although I have to admit I wasn’t crazy about that red leather.)

Why didn’t Matthews play some of the earlier interview for Maher? We have so many possible explanations it’s hard to settle on just one. In the tank for Obama? MSNBC misogyny (aka, dog bites man)? Class prejudice? I know. How about “All of the above”?

Redistribution and the Constitution

A YouTube video featuring clips from a 2001 Barack Obama interview is making the rounds. You can view it here. This video is about four minutes long and concludes with the clip of Obama talking to Joe the Plumber about spreading the wealth. I’ll write later about some of the claims that others have made with regard to what Obama’s comments mean but in this post I want to analyze what Obama does and does not say in this interview.

The four minutes in the YouTube video are pulled from an interview that is much longer: 53 minutes and 22 seconds. This interview took place on January 18, 2001. It was entitled, “The Court and Civil Rights” and was a segment of a program called “Odyssey” on WBEZ, a public radio station in Chicago. The interview was hosted by Gretchen Helfrich and her guests were:

Susan Bandes – Professor of law at DePaul University and the editor of the book, “The Passions of Law”
Dennis Hutchinson – The William Rainey Harper professor in the college, senior lecturer in the law school and editor of the Supreme Court Review at the University of Chicago
Barack Obama – Illinois State Senator from 13th district and a senior lecturer in the law school at the University of Chicago

The redistribution issues are covered in approximately the last 20 minutes of the interview. The entire interview is interesting if you have time but to evaluate what Obama is saying you can focus on the last 20 minutes. You can find the complete interview here apparently in RealAudio format.

I’ve transcribed much of those last 20 minutes below so if you want to read the actual interview before I discuss it, just page down until you see “Partial Transcript” then come back here for my analysis.

Let me talk first about what Obama does not say. First, despite claims to the contrary, it is crystal clear that Obama is not suggesting the United States Supreme Court can or should be the vehicle for redistributing wealth in the United States. On the contrary he explicitly rejects the Court as such a vehicle partly because he feels the task is beyond its capabilities, partly because it raises separation of powers issues, and partly because he recognizes the difficulty of legitimizing such action by the Court. Earlier in the interview he also discusses the fact that the Supreme Court cannot or will not get too far ahead of the general social consensus and this may enter into his determination as well. Obama explicitly regrets that the civil rights movement focused so heavily on the Supreme Court (or possibly courts in general) that it gave short shrift to political and organizational activities that offered a hope of effecting redistributive change in a way litigation did not.

Obama is a little fuzzier on the issue of whether State Supreme Courts can be effective in this regard and speaks about how San Antonio v Rodriguez seems to have resulted in issues of redistribution and wealth being litigated at the State level with mixed results. Nonetheless he certainly does not make an argument that litigation at the State level is an appropriate or desirable approach to achieving redistribution of wealth.

Second, Obama does not think the redistribution of wealth is an “administrative task”. He speaks of administrative issues as part of the separation of powers issues you run into if you attempt to use the Court to achieve wealth redistribution.

On the other hand, I believe the interview does make clear that Obama considers the redistribution of wealth to be a desirable goal and seems to consider such redistribution a component of - or possibly a precursor to - “more basic issues such as political and economic justice”. I know that this is not exactly news - see Joe the Plumber - but the focus in this interview is subtly different. In speaking with Joe the Plumber, Obama said:

It’s not that I want to punish your success, I just want to make sure that everybody who is behind you, that they’ve got a chance for success too. I think that when you spread the wealth around, it’s good for everybody.

In that formulation, redistribution of wealth is to help less successful people become more successful. This could be interpreted as a carelessly rendered version of George Will’s description of conservatives: they believe in equality of opportunity. That is, Obama can argue he is redistributing wealth to help the less wealthy achieve more wealth themselves through, for example, a better education financed through more tax dollars.

Obama’s views in the January 2001 interview are somewhat different. He does speak of the redistribution ramifications of truly implementing Brown v Board of Education and that could again be interpreted as using more tax dollars to achieve better education to in turn help the less wealthy achieve greater wealth. However, he also speaks of the Supreme Court “invest[ing] formal rights in previously dispossessed peoples” but not “venturing into the issues of redistribution of wealth and more basic issues such as political and economic justice”; about the need to “put together the actual coalitions of power through which you bring about redistributive change”; about the fact that he is “not optimistic about bringing about major redistributive change through the courts”. (That word “major” really bothers me.) This seems to lean more toward the idea of redistribution of wealth as a good thing in and or itself rather than as a necessary condition for - or a side-effect of - other specific policies like equalizing educational opportunity. In this interview, Obama seems more like George Will’s description of liberals: they believe in equality of outcome.

Is this a hairsplitting difference? I don’t think so. For example, in writing about the YouTube video (not the interview itself), Ann Althouse says:

Now, there remains the question of how much he would want the legislative branch to do in the name of economic justice, and obviously, the phrase "redistribution of the wealth" gets people going. But that's the same old question we've been talking about for months. [snip]

But we don't know how much, so we're back to where we were before we listened to this clip. Obama favors some degree of progressive taxation and some programs to benefit people in lower income groups and so forth ... as do the great majority of Americans, including John McCain.

I favor progressive taxation but not because I explicitly want to redistribute wealth. Rather I believe that, for example, a 10% tax rate imposed on someone making $15,000 per year is far more of a burden than a 10% tax rate imposed on someone making $150,000 per year and so the person making more can afford to pay a greater percentage of his income in taxes with less pain. The effect may be partially to redistribute wealth but my rationale for a progressive tax rate is not redistribution of wealth. (I suppose you could characterize it as a type of “economic justice” but it has nothing to do with a civil rights aspect of such justice. Although not at all religious, I’ve always found the Parable of the Widow’s Mite compelling.)

Similarly, I am not willing to let old people starve or lack for medical care so I support Social Security and Medicare. I am not willing to let poor people - especially poor children - live on the streets or go hungry or do without health care so I support food stamps, some type of income assistance, and Medicaid. I believe the country as a whole benefits when everyone who is qualified can get a college education so I support government assistance to students. All of those policies require some redistribution of wealth but I’m willing to accept that redistribution in order to achieve specific goals, whether moral or practical. That is far different from pursuing a goal of redistribution of wealth for its own sake, which is what Obama seems to be advocating in the January 2001 interview.

Is Obama advocating a strictly racial redistribution of wealth? After all, this discussion is taking place within the context of the civil rights movement and Obama segues into wealth redistribution and social and economic justice by talking about what the Warren Court did not do in its expansion of those rights. This question is hard to answer because it is so difficult to disentangle the 2001 Obama the Constitutional lawyer from the 2008 Obama the candidate. I believe that if I had listened to this interview in 2001 I would have first thought Obama was talking about transferring wealth to improve educational opportunities for African-American children but by the end of the interview would have moved to thinking he was proposing some type of reparations for African-Americans. However, I do not believe the 2008 Obama the candidate thinks of wealth redistribution strictly along racial lines. Certainly his tax plan is targeted solely by income and has no racial component. He advocates the redistribution from the wealthy of every race and ethnicity to the less wealthy of every race and ethnicity. You may oppose his plan but you must give him credit for color-blindness.

In what is for me a more serious issue, the January 2001 interview raises questions about how Barack Obama views the Constitution. Certainly the views he expresses in this interview can be interpreted as a conviction that it is desirable to “break free from the essential constraints that were placed by the founding fathers in the Constitution ... that generally the Constitution is a charter of negative liberties”. However, it is also possible to argue he was speaking of what the Warren Court did - interpreting the Constitution as it had always been interpreted - rather than of what he wishes it had done or wishes the current Court would do.

I would probably be less concerned about this issue if I had not listened to another interview Obama did with WBEZ on September 6, 2001, where the discussion was about “Slavery and the Constitution”. The remarks that concern me begin about 45 minutes into the interview. After Richard John, one of the other guests on the show, talks about his view of the Declaration of Independence and the Constitution, the host (Gretchen Helfrich again) asks Barack Obama what his views are on those documents.

Obama: I think it’s a remarkable document.

Helfrich: Which one?

Obama: The original Constitution as well as the Civil War amendments but I think it is an imperfect document and I think it is a document that reflects some deep flaws in American culture, the Colonial culture nascent at that time. African-Americans were not, first of all they weren’t African-Americans. The Africans of the time were not considered a part of the polity that was of concern to the Framers. I think that as Richard said it was a nagging problem in the same way that today we might think of environmental issues and some other problems where you have to balance cost benefits as opposed to seeing it as a moral problem involving persons of moral worth. And in that sense I think we can say that the Constitution reflected an enormous blind spot in this culture that carries on until this day and that the Framers had that same blind spot. I don’t think the two views are contradictory: to say that it was a remarkable political document that paved the way for where we are now and to say that it reflected the fundamental flaw of this country that continues to this day.

I can’t figure out what this means and perhaps only another Constitutional lawyer could. I certainly understand that the Constitution's original treatment of people of African ancestry living in what became the United States was a moral problem but I’m uncertain of the leap from there to environmental issues. What exactly is the “enormous blind spot”, “the fundamental flaw” in this culture and country that Obama sees so clearly? I very much wish someone would sit down with Obama, read his comments to him, and ask him to expound on them.

In summary, the January 2001 interview is not the redistribution bombshell some pundits believe it to be but it does put a different slant on Obama’s “spread the wealth” argument, making it seem more like a long-standing and freestanding goal and less like a well-within-the-mainstream variation on the sort of redistribution Americans find acceptable in order to implement desirable policies. In particular his apparent (although probably deniable) desire to “[bring] about major redistributive change” (emphasis mine) is troublesome and in the right hands (about which I’ll write in that later post) could be political dynamite.

The Constitutional concerns raised by the January 2001 interview and exacerbated by the snippet from the September 2001 interview are far more serious. I would very much like to be reassured about Obama’s views on the Constitution and how he believes it should be interpreted and perhaps modified. I’ve just spent eight years with a President who does not share my understanding of the meaning, primacy, and enduring value of the United States Constitution. I’d really hate to end up with another President who hails from a different party but is nonetheless cut from the same cloth.

*****

Partial Transcript beginning about 34 minutes into the interview

Obama: After Brown v Board of Education a major issue ends up being redistribution, how do we actually get more money in the schools and how do we create equal schools and equal educational opportunity. Well, the [Supreme] Court in a case called San Antonio v Rodriguez in the early 70’s basically slaps those kinds of claims down and says, “You know what? We as a court have no power to examine issues of redistribution and wealth inequalities with respect to schools. That’s not a race issue, that’s a wealth issue and we can’t get into this.”

Hutchinson: And the Federal Constitution doesn’t provide any warrant for intervention.

Obama: Exactly. So now but what’s interesting is a whole bunch of folks start bringing these claims in state courts under state constitutions that call for equal educational opportunity and you see state courts - with mixed results - being more responsive to it. The reason I think that’s relevant is not to say that I’m not worried about the lack of protections coming from the Supreme Court but it is to say though that you’ve got a cultural transformation that changes how states operate and how states think about the protection of individual rights in ways that didn’t exist prior to the Warren Court and that I think is an important legacy to keep in mind.

There is a brief discussion about Bush v Gore and how the Florida Supreme Court was active in a way that would be preferred by liberals and so a realization that Federalism may have advantages. Then at about 38 minutes in:

Hutchinson: I think the interesting development here is the one that Barack has emphasized and that is that questions of both litigation strategy and political strategy are tending to move more back toward the states now given what the Supreme Court is doing and given Republican control over effectively both Houses of Congress. And so we’re seeing a shift in strategy and a shift in location and it’s important to keep that in mind. I think we can be too Supreme Court of the United States obsessed sometime in thinking they can deliver questions of social justice in kind of an unbroken vector from Brown v Board of Education. And my favorite example that Barack and I were talking about before we went on the air this morning is the question of welfare rights. You know this obsession with the Due Process Clause, thinking if you can just force these welfare administrators to hold face to face hearings before they cut people off from certain welfare benefits will produce more social justice, more money for deserving people, and the like. There was a decision in 1971 that mandated that and what it did of course is to mean that more money earmarked for welfare went to hearings as opposed to benefits. And then the Supreme Court changed its mind five years later and said, “Well, you don’t have to have a face to face hearing, you can just have a paper review of the record.” And the idea that somehow you could use the Due Process Clause for redistributive ends socially that would be stable I think was an astonishing assumption in the mind of litigators about what they could accomplish over time and it just didn’t last very well.

Obama: And it essentially has never happened. I think that if you look at the victories and failures of the civil rights movement and its litigation strategy in the court. I think where it succeeded was to invest formal rights in previously dispossessed peoples, so that I would now have the right to vote. I would now be able to sit at the lunch counter and order and as long as I could pay for it I’d be okay. But the Supreme Court never ventured into the issues of redistribution of wealth and more basic issues such as political and economic justice in this society. And to that extent, as radical as I think people try to characterize the Warren Court, it wasn’t that radical. It didn’t break free from the essential constraints that were placed by the founding fathers in the Constitution, at least as it’s been interpreted and Warren Court interpreted it in the same way, that generally the Constitution is a charter of negative liberties. Says what the states can’t do to you. Says what the Federal government can’t do to you, but it doesn’t say what the Federal government or the State government must do on your behalf, and that hasn’t shifted and one of the, I think, the tragedies of the civil rights movement was because the civil rights movement became so Court (court?) focused I think that there was a tendency to lose track of the political and community organizing and activities on the ground that are able to put together the actual coalitions of power through which you bring about redistributive change. And in some ways we still suffer from that.

The show then took phone calls from listeners. The first two questions were from “Joe” who sparked a brief interesting discussion on the fact that the civil rights movement had a moral/religious base but at the same time there is a feeling of discomfort with religion in political issues. Obama referred to this as a “long-standing contradiction” in “the liberal community”. Then a caller named “Karen” asked a question:

Karen: The gentleman made the point that the Warren Court wasn’t terribly radical. My question is - with economic changes - my question is it too late for that kind of reparative work economically and is that the appropriate place for reparative economic work to take place?

Helfrich: You mean the Court (court)?

Karen: The courts or would it be legislation at this point?

Obama: You know maybe I’m showing my bias here as a legislator as well as a law professor but I’m not optimistic about bringing about major redistributive change through the courts. The institution just isn’t structured that way. You just look at very rare examples where during the desegregation era the Court was willing to, for example, order changes that cost money to local school districts. And the Court was very uncomfortable with it. It was hard to manage, it was hard to figure out. You start getting into all sorts of separation of powers issues in terms of the Court monitoring or engaging in a process that essentially is administrative and takes a lot of time. The Court’s just not very good at it and politically it’s very hard to legitimize opinions from the Court in that regard. So I think that although you can craft theoretical justifications for it legally, I think any three of us sitting her could come up with a rationale for bringing about economic change through the courts, I think that as a practical matter our institutions just are poorly equipped to do it.

Bandes: I don’t necessarily disagree with that but I think it also depends on, much of the time what we see the courts are doing is ratifying the status quo. And in fact the Court makes redistributive decisions or distributive decisions all the time.

Obama: Right

Bandes: Let me give you an example which is that the Court considers whether it’s okay to take a program, a Federal Medicare program, that provides compensation, that recompenses people by insurance for every medical procedure they can have except abortion and it upholds that.

Obama: Right.

Bandes: We can except abortion from that. Well, that’s a decision about what kinds of subsidies we’re willing to uphold and what we’re not.

Obama: Although typically the Court can certainly be more or less generous in interpreting actions and initiatives that are taken by the legislature. But in the example of funding of abortions or Medicare and Medicaid the Court’s not initiating those funding streams. Essentially, what the Court is saying is at some point, “Okay, this is a legitimate prohibition or this is not” and I think those are very important battles that have to be fought and they do have a distributive aspect.

A caller named “Anna”, a community organizer planning to go into labor organizing asks why community organizing was given less emphasis than litigation. Obama answers that community organizing is harder than litigation, saying “it’s difficult to mobilize change at the local level”. Then:

Helfrich: It seems to me that there is a perception abroad that legislative solutions are somehow unstable as a result of the fact that you can then take them to the Court and the Supreme Court is this sort of last word. That you can struggle and struggle and struggle and get something done, get something passed but that may not be the end of the story.

Hutchinson: Well, traditional solutions are unstable, too. Because facts can change. You’re always arguing in a binary situation, there’s always another side to the case. And much of the desegregation efforts proved how hard it was for Federal District judges to continue to superintend how many students go from one section of town to another section of town and, oh, since the demographics have changed the following year we have to look at it again one more time. That doesn’t accomplish stable social change because you always have the intervention of a not clearly predictable actor, that is, the judiciary in play.

The show wraps up with a brief discussion of the limits on the Supreme Court’s power, that it’s all based on reputation, the Court has neither the power of the purse nor the power of the sword.

BUB Three

I’ve changed my mind about the Paulson bailout plan - and the Democrats’ permutation and the Republicans’ alternative - a half-dozen times in the last eleven days. Here’s where I stand now.

If we’re going to give money to people who made stupid decisions, I’d still rather give it directly to the homeowners with the bad mortgages than to the big firms with the bad mortgage-based assets. The only change I’d make to my original Bottom-Up Bailout proposal is that only primary residences will be eligible for the plan. If you put yourself in debt up to your neck to buy a vacation home or to flip houses hoping for a quick buck, you’re on your own.

Barring that, there are two alternatives to the Paulson Plan floating around that sound interesting to me. One is Mort Zuckerman’s
suggestion that the government invest in perpetual preferred shares in the companies that need bailing out. As I understand it, perpetual preferred shares have no voting rights but are first in line for dividends and take precedence over common shares in case of bankruptcy. What I don’t know about this plan is which companies the government would invest in: any companies that wanted in; only companies that are really troubled; or only companies that the government decided were sound enough to get back on their feet with a little help. If the investment was restricted to only certain companies there’s a lot of room for political maneuvering and preferential treatment. It’s worth noting, however, that that’s at least as big a problem with the Paulson Plan since no one seems to be willing to specify which assets will be bought from which companies at what prices.

Another interesting idea is what Peter Robinson at The Corner refers to as “Plan B”:

the use of the FDIC to backstop commercial banks, on which (as quite distinct from investment banks) our system of payments and credits actually depends. The broad outlines of such a plan—increasing the deposit insurance level while giving the FDIC additional discretion to help wobbly banks—are in very little dispute.

As with the Zuckerman Plan and the Paulson Plan, the “discretion” part of “additional discretion to help wobbly banks” means someone has to choose which institutions live, which die, and which get dismembered and sold off.

One final thing to keep in mind when considering the Paulson Plan. We’re now hearing more and more about how the $700 Billion is an investment or even a “loan” because once the government buys the mortgage-based assets, it will hold them until the real estate market stabilizes then sell them and recoup some or all of the original investment - perhaps even make a profit. As Mort Zuckerman pointed out on the McLaughlin group this past weekend, we don’t know when or where the real estate market will stabilize; no one knows what value - if any - these assets have now or will have in the future; and he expects the real estate market to drop by another 15 to 20 percent. (I cannot find a link to this.) Similarly, Jeffrey Miron says:

Further, the current credit freeze is likely due to Wall Street's hope of a bailout; bankers will not sell their lousy assets for 20 cents on the dollar if the government might pay 30, 50, or 80 cents.

The costs of the bailout, moreover, are almost certainly being understated. The administration's claim is that many mortgage assets are merely illiquid, not truly worthless, implying taxpayers will recoup much of their $700 billion.

If these assets are worth something, however, private parties should want to buy them, and they would do so if the owners would accept fair market value. Far more likely is that current owners have brushed under the rug how little their assets are worth.

This less than rosy view of how much of our $700 Billion we’d get back doesn’t necessarily mean we shouldn’t follow the Paulson Plan. It just means that if we do we should accept we may never see our money again. Think of it like money you invest in your ne’er-do-well brother-in-law’s combination video rental store and laundromat: it’s possible his success will finance your retirement but you shouldn’t stop socking money away in your 401(k).

*****

*****

Updated October 24, 2008, with links to my subsequent BUB posts

Since I keep adding BUB posts, I updated this on December 13, 2008, to put all BUB posts in their own category. That way they can easily be found without my having to keep updating all the existing ones each time I add a new one.

BUB Two

I started thinking about one of the articles I cited under “Sources and additional reading” in my BUB post. The article was a TigerHawk post called “Did Enron beget AIG?” In my earlier post, I said this about that:

Thoughts on mark-to-market regulations; links to a Wall Street Journal article that claims that the fact the market wasn’t moving meant the value of mortgage-based assets was marked down more than was justified by the drop in value of the real estate at the bottom of the heap. Interesting but it is still the case that if no one wanted to buy a mortgage-based asset then that asset’s value was zero regardless of the value of the underlying real estate.

I went back and reread the TigerHawk post and the WSJ article it linked to and the comments on the TigerHawk post (Charlottesvillain is particularly helpful). Then I reread neo-neocon on “Naked shorts and other wonders of the financial world” and the articles she links to.

I still stand by my original statement that “if no one wanted to buy a mortgage-based asset then that asset’s value was zero regardless of the value of the underlying real estate.” To use a simple (and probably simplistic) analogy, imagine I am going to make cupcakes for a bake sale. I purchase $10 worth of ingredients and produce 48 cupcakes. That makes the underlying value of each cupcake about 21 cents assuming my labor is not considered. I price the cupcakes at 50 cents each. A couple sell quickly but when the buyers try them they discover the cupcakes taste terrible. Word spreads and no one will buy my cupcakes. Finally someone offers me 5 cents a cupcake - his dogs love sweets and he figures they won’t be too picky. I can argue until I’m blue in the face that the underlying value of my cupcakes is 21 cents each but the fact remains that their market value is 5 cents. Period.

What is clearer from my reading is that the market price of mortgage-based assets is not tightly tied to the value of the real estate on which they’re based. Home prices declined 20% while the market price of some mortgage-based securities apparently declined nearly 100%. Given this my idea to save the financial system by having the government buy up mortgages themselves rather than the distressed mortgage-based assets may not make a bit of difference to the market price - or liquidity - of those assets. It simply won’t matter that the underpinnings of those assets is now secure - the assets themselves will still be undesirable.

Rather than being a reason to do away with requiring mark to market pricing isn’t this actually a reason to do away with products that are so far removed from reality? The WSJ describes them thus:

Among its many products, AIG offered insurance on derivatives built on other derivatives built on mortgages. It priced those according to computer models that no one person could have generated, not even the quantitative magicians who programmed them.

If no one can understand how these products are priced perhaps we should consider not creating them and not selling them. Or if we believe its important to continue to do so then we need a way to segregate exposure to incomprehensible and unpriceable exotics from more mainstream investment and banking - especially if we are going to insist that mark to market valuation is not applicable to such airy-fairy investments.

*****

*****

Updated October 24, 2008, with links to my subsequent BUB posts

Since I keep adding BUB posts, I updated this on December 13, 2008, to put all BUB posts in their own category. That way they can easily be found without my having to keep updating all the existing ones each time I add a new one.

Counting my chickens

As of today, John McCain is winning the popular vote, up 2.3 points.

At the same time, Barack Obama is winning the Electoral College, 259 to 247.

I know it’s early, I know these are just polls and leaners, I know much can - and almost certainly will - change between now and November 4. Nonetheless, given this post of mine from more than two months ago, I am putting up the sub-title I originally envisionsed (heh, heh) when I started this blog. It - like my blog name - is from Marion Zimmer Bradley’s Firebrand, a retelling of the story of Kassandra of Troy.

Now I need to go take a couple of Motrin. I think I hurt my arm patting myself on the back.

It's no fish ye're buying, it's men's lives.

So said Sir Walter Scott on the dangers of fishing.

I first read the Time article "Undertaker for the mules" when it was published in 1997. A copy of it has gone with me from torn-out page in a file to document on my Classic Mac to document and link on my iMac and now to my blog. I think Sir Walter could relate.

Deep-Sixing Two and Five

On June 29, Katrina vanden Heuvel was part of the Round Table discussion on This Week with George Stephanopoulos. While discussing the possibility that a Bob Barr third-party candidacy might draw enough votes away from John McCain to open up states like Alaska and Georgia for an Obama victory, vanden Heuvel said:

We’ve been talking about expanding the electoral map. I think until you bust open the Electoral College - which I hope we’ll do in 2012 - you can’t expand it that much.

This struck me as odd since four years is not very long to pass the Constitutional amendment that would be needed to do away with the Electoral College. Or would it? I turned to Wikipedia and eventually found The National Popular Vote Interstate Compact, also known as The Amar Plan. This, it turns out, is precisely what vanden Heuvel had in mind.

Under The National Popular Vote Interstate Compact (TNPVIC), individual states agree to abide by the national popular vote. In other words, regardless of how voters in a particular state vote, that state will cast all its electoral votes for whoever wins the popular vote nationally. TNPVIC further specifies that states can agree to the Compact but their agreement will not take effect until states controlling a majority of electoral votes have signed onto TNPVIC. As Wikipedia points out, this means that as few as eleven states could put this Compact into effect: the eleven states with the most electoral votes control a majority of those votes.

It is not clear whether TNPVIC is Constitutional. On the one hand, Article Two, Section 1, Clause 2 of the Constitution allows each state to decide for itself how to apportion its electoral votes. On the other hand, Article One, Section 10, Clause 3 (the Compact Clause) forbids states from entering into compacts with other states without Congressional approval. On the third hand, the extent of the Compact Clause’s prohibition seems to be unclear. Even if TNPVIC is Constitutional, however, it is clearly an attempt to make an end-run around the mechanism for amending the Constitution provided in Article Five.

Article Five requires a two-thirds vote of quorums of both Houses of Congress or a request by two-thirds of the state legislatures to even propose amending the Constitution. It further requires that three-fourths of the states (either by Legislature or Convention) approve the amendment before it takes effect. And, in fact, there have been previous attempts to abolish the Electoral College using the Constitutionally prescribed amendment process. Since these attempts failed, TNPVIC was devised to do away with the need for those pesky super-majorities: the Compact could effectively amend the Constitution with only eleven/fiftieths of the states agreeing. Not only does this approach treat the Constitution as a system to be beaten rather than the highest law of the land, it drives another nail into the coffin of Federalism.

Alongside my outrage, however, I must admit to some amusement. I’m not entirely sure the lawmakers and governors who support TNPVIC have thought this through. The Compact was dreamed up in 2001. It doesn’t take a Constitutional lawyer to conclude that the scheme was originally developed in response to the 2000 Presidential election in which Al Gore won the popular vote and George W. Bush won the Electoral College. Based on the timing - and on Katrina vanden Heuvel’s approval - I’m guessing TNPVIC is driven primarily by Democratic outrage over being cheated out of the Presidency in 2000. I’m further guessing that Democrats suspect it’s unlikely approaching impossible that there will be a situation where Republicans win the popular vote but Democrats win the Electoral College. What if they’re wrong?

As a starting point, let’s assume the 2008 election will look just like the 2000 election - and then we’ll change a few things and see what happens.

First, let’s say that all the states that went for Gore in 2000 approve TNPVIC in time for the 2008 election. That would mean states controlling 260 electoral votes would have approved the Compact. (This number is different from the 266 electoral votes Gore received because redistricting has changed the electoral vote map. And because there was one abstention by a District of Columbia elector. Who knew?) To get TNPVIC to go into effect, it needs states controlling 270 votes to agree to the Compact. So let’s say Florida also signs onto TNPVIC. That means that states controlling 287 electoral votes have now approved TNPVIC and it will take effect for the 2008 election.

Second, let’s say that every state that went for Gore goes for Obama. And let’s give Obama Florida by saying that 1000 Floridians who voted for Bush now decide to vote for Obama. Now Obama has 287 electoral votes, all of them from states that signed on to TNPVIC, and Obama has the popular vote. Obama is the President and all is well. But what if there’s a shift - just a slight shift - in the popular vote?

In 2000, Bush got 50,455,156 votes; these become McCain’s votes in 2008. Gore got 50, 992,335 votes; these become Obama’s votes in 2008. We’ve already taken 1000 Florida votes away from McCain and given them to Obama, so now our numbers are:
McCain - 50,454,156
Obama - 50,993,335

Obama is winning the popular vote by 539,179. In 2008 there were 6 states where the margin of victory was less than 12,000 votes: Florida, Iowa, New Hampshire, New Mexico, Oregon, and Wisconsin. That leaves 44 states plus the District of Columbia where we can play with the popular vote a little. Let’s say that in each of these 45 states (yes, I know DC is not a state) there’s a swing in the popular vote of 12,000. That is, in each of these 45 states 6,000 people who voted for Gore decide to vote for McCain. That means McCain would pick up 270,000 votes and Obama would lose 270,000 votes.

Now our popular vote looks like this:
McCain - 50,724,156
Obama - 50,723,335

Oops! Guess who gets to be President? And guess how happy the voters in the states that signed on to TNPVIC are going to be when their elected officials inform them that, yes, we know you voted for Obama and, yes, we know he won the Electoral College and, yes, we know he should be President, but we’re going to cast our electoral votes for McCain?

I’m sure the supporters of the TNPVIC consider an outcome like this very unlikely. But I think there’s a good chance this scenario or one very like it will happen. Look at it this way. More than 225 years ago a group of pretty smart guys wrote a Constitution that embodied a new way of looking at government and at the same time glued a bunch of disputatious states into one nation. That Constitution has served us well for all these years, amended as necessary by a mechanism designed to be as difficult as possible and thereby to avoid the tyranny of the majority. Now a group of people, many angry at losing and all tired of playing by the rules, are willing to do whatever it takes to get their way. If that means cutting the heart out of two Articles of the Constitution, that’s fine with them because they know how this country should be governed far better than those old-timers in funny clothes.

I call that hubris. And as our forefathers in democracy taught us, nothing follows hubris as inexorably as nemesis.

*****

Sources, numbers, and a confession:

Presidential Election of 2000, Electoral and Popular Vote Summary

Wikipedia - United States presidential election, 2000 (detail)

Wikipedia - United States presidential election, 2000

Wikipedia - List of U.S. states by population

I took the transcript of Katrina vanden Heuvel’s comment from my own tape of This Week with George Stephanopoulos. You can find the video at This Week under “The Roundtable”. (I assume this moves off the main site once the next show airs.) Her comment about the Electoral College should begin about 7-8 minutes in.

The final numbers in this post look pretty simple, but I juggled numerous articles and four spreadsheets to get to them. I love my iMac but I hate not being able to put code behind Appleworks' spreadsheet the way I could behind Excel. If you find any mistakes, please let me know.

Although the existence of The National Popular Vote Interstate Compact came as a surprise to me, my home state of New Jersey is one of four states that have signed onto this deal. My only excuse for not realizing this is that the Legislature did this in 2007 when for good reason I was paying absolutely no attention to politics. The other three states that have signed onto the Compact are: Maryland, Illinois, and Hawaii. All four of these states went for Gore in 2000. They also went for Kerry in 2004; and Clinton in 1992 and 1996.