Friday, October 12, 2018

On a Blatant Conflict of Interest in Georgia


A coalition of advocacy groups launched a lawsuit on October 11, 2018 to “block Georgia from enforcing a practice critics say endangers the votes of more than 50,000 people in [the upcoming election] and potentially larger numbers heading into the 2020 presidential election cycle.”[1] Kemp was at the time Georgia’s Secretary of State, which means he had considerable discretion concerning how the election would be run. The conflict of interest lies in the fact that he was running for governor—interestingly against Stacey Abrams, a candidate who had been a voter-rights lawyer! I submit that such a conflict of interest should never have been permitted.
Rather than focus on the controversial “exact match” issue at the center of the suit, I want to call attention to the fact that “the Abrams campaign called for Kemp to resign as the state’s top elections official in order for Georgia voters to ‘have confidence that their Secretary of State [will] competently and impartially oversee the election.”[2] For a candidate to also be the top elections official is such a blatant conflict of interest that we can legitimately ask in retrospect why the travesty was allowed to exist in the first place. Shouldn’t candidates be barred from overseeing their own election? Why, moreover, didn’t Georgians scoff at the conflict of interest and demand that it be deconstructed immediately after Kemp declared his candidacy for governor?


[2] Ibid.

Thursday, October 11, 2018

Congressional Cuts to Food Stamps: Violating a Human Right?

During the debate in the U.S. House of Representatives in June 2013 on a proposed $20.5 billion in cuts over 10 years to the Supplemental Nutrition Assistance Program (SNAP), otherwise known as the food stamps program, proponents of the cuts denied that they would make it more difficult for the poor to feed themselves. Rep. Rick Crawford claimed that the cuts would be “eliminating abuse.”[1] For example, some drug addicts sell their “food stamps” for something like half value and use the cash to buy drugs. The addicts manage to get their food at pantries and soup kitchens. While such fraud exists, the proposed cuts would have hit bone. According to the Center on Budget and Policy Priorities, nearly 2 million people would lose SNAP eligibility were the cuts to become law.[2] After the debate, “Tea Party” Republicans wanting even more cut combined with Democrats against any cuts defeated the proposal.
Three months later, the U.S. House voted 217 to 210 to cut food stamps by $40 billion.  Obama had already promised a veto, which the tally could not overcome. Even so, that no vote had been taken to suspend or end foreign aid to Egypt on account of the military coup or to cut corporate welfare is telling in what this says about priorities. Even as some House supporters of the bill insisted that the innocuous decrease in federal funding merely reflects increased enforcement of existing income limits, still other House supporters admitted that the cuts are oriented to getting as many able-bodied (i.e., non-disability) recipients as possible to get a job.
"If you're a healthy adult and don't have someone relying on you to care for them, you ought to earn the benefits you receive," said Rep. Tim Huelskamp (R-Kan.). "Look for work. Start job training to improve your skills or do community service. But you can no longer sit on your couch or ride a surfboard like Jason in California and expect the federal taxpayer to feed you."[3]
That is to say, rather than being a right, sustenance ought to be contingent on work. To the extent that the bill reflects this aim, more was involved in the cuts than merely strengthening enforcement of existing caps. In fact, the proposed decrease in funding could even take a pound of flesh out of the human right to sustenance in a society of interdependence.
I suspect that part of the argument on behalf of earning as a prerequisite reflects a failure to realize that the increased number of food recipients since 2007 was in large measure due to the post-financial-crisis economic downturn.
In 2012, for example, the SNAP program spent around $80 billion on about 47 million Americans—one in seven.[4] According to the Congressional Budget Office, the increased cost and usage of the program over the previous few years was due to the recession following the financial crisis of 2008 and the subsequent nearly-jobless recovery.[5] Nevertheless, the ballooning cost made the program vulnerable politically to being “downsized.” Hence the debate on the U.S. House floor in June 2013 and the claim on the Hill that too many Americans had become dependent on the federal government for food. Meanwhile, people on food stamps were wondering how they were supposed to get off the aid when “there are no jobs.”[6]
A similar catch-22 or double-bind would also apply to the proposal by Rep. Steve Southerland “that would allow—but not require—individual states to test work requirements.”[7] The 1996 welfare law had included work requirements for food-stamp recipients, though most states would be granted waivers by the Obama administration. Getting recipients to attend mandatory weekly “check-in” meetings and fill out weekly job search forms, let alone actually find a job, turned out to be a lesson in futility for state employees. Members of Congress and the Clinton administration had put the front-line employees at the local level in an impossible position of fitting a federal uniform requirement with the actual conditions of the recipients. In regard to Southerland’s proposal in 2013, while it would accommodate the different conditions of the states and respect their portion of sovereignty, a work requirement would not fit with the children, elderly and disabled, who make up a significant number of the recipients. Again, it would seem that members of Congress are out of touch, with ordinary people potentially at risk of having to pay the price.
Rather than expecting an answer from reason to unravel the "earnings/no jobs" double-bind, we need to look at the passions whose role is hinted at by the existence of the logical contradiction itself.
I contend that the earnings-rationale is in part actually exaggerated anger at real abuses. That is, the work ethic is in part a front here for an instinct to retaliate. Plato would point out at this point that a person talking reason to one's own undisciplined passion is necessary to render such a psyche just (i.e., passions and courage ruled by reason). Moreover, a polis (i.e., society) is just if and only if it is ruled by reason rather than passions such as resentment.
As is often the case with vengeance, collateral damage unforeseen by the hypertrophic passion would result. The vote had the potential of triggering a wake-up call of sorts concerning the realization that what happens in Congress can really hit home on Main Street. Sadly, the most vulnerable can indeed fall through the cracks, with the resentment rejoicing as the human right takes a hit.
Even reducing the funding of the SNAP program by a certain percent can set in motion consequences unknown to members of Congress. For example, well into a month in which the state had halved recipient food benefits, I went to a food pantry. The place was inundated with people who had run out of food funds unexpectedly early. SNAP recipients who had never been to the pantry had to wait two hours just to be registered, after which they were told to go to the end of the “regular” line.  The pantry ran out of food, rationing portions to most of the first-times and turning away still others. Recipients I spoke with scoffed at the notion that they were enjoying “being dependent,” and, moreover, had much choice in the matter, given the lack of jobs. As for the pantry’s volunteers, they admitted that their procedure for the first-timers was unfair; however, this did not keep the volunteers from using the occasion nevertheless to spread their Christian beliefs to the frustrated first-timers standing in their second line. Were Congress to reduce funding to the states for the SNAP program, it would not take much for the situation on the ground to get out of hand. From my observations, food pantries should not be relied on to fill up the slack.
Fundamentally, because food is a daily requirement for human beings, a daily supply of food is a human right. To make fulfilling that need contingent at all does not match the lack of contingency in the daily need. Subjecting it to the politics in Congress or a work requirement essentially holds the SNAP recipients hostage. Even just referring to food as nutrition is problematic, as the latter is not strictly speaking as much of a need as food itself. Eating more nutritious food is a worthy goal, whereas eating food is a daily requirement. Distinguishing, or bracketing, those things that are necessary for daily sustenance from all other budget items can thus be justified on the basis of human physiology—and thus human rights.
In dealing with something as necessary and individual as food consumption, small changes in a federal law can have huge, unexpected consequences as front-line state employees translate the changes as they affect particular lives. For this reason, Rep. Ryan’s proposal to move the SNAP program to the states in a block grant makes sense.[8] Besides state legislators being closer to the local contexts, a fixed block grant is more in line than Congressional programs with the dual-sovereignty feature of modern federalism. To be sure, the state governments would have the sole responsibility to see to it that the most vulnerable are not inadvertently blown over by violent political winds making even minor state-wide changes to the programs. As a rule of thumb, representatives in Congress could do much worse than treat food as unconditional in terms of human consumption. Hence, if a person cannot secure enough food on his or her own, the role of government would be to make food-sustenance as close to unconditional in practice as possible.


To venture deeper, down to a foundation for the right, See:
"Food as a Human Right: A Basis in Rousseau"



1. Ned Resnikoff, “House Debates $20.5 Billion Cuts to Food Stamps,” MSNBC, June 18, 2013.
2. Dottie Rosenbaum and Stacy Dean, “House Agricultural Committee Farm Bill Would Cut Nearly 2 Million People Off SNAP,” The Center on Budget and Policy Priorities, May 16, 2013. “By eliminating the categorical eligibility state option, which over 40 states have adopted, the bill would cut nearly 2 million low-income people off SNAP.”
3. Arthur Delaney and Michael McAuliff, "House Votes to Cut Food Stamps by $40 Billion," The Huffington Post, September 19, 2013.
4. Associated Press, “House GOP Considers Food Stamp Work Requirements, Cutting Spending for Feeding Program,” The Washington Post, July 24, 2013.
5. Dottie Rosenbaum and Stacy Dean, “House Agricultural Committee Farm Bill Would Cut Nearly 2 Million People Off SNAP,” The Center on Budget and Policy Priorities, May 16, 2013. “By eliminating the categorical eligibility state option, which over 40 states have adopted, the bill would cut nearly 2 million low-income people off SNAP.”
6.  I heard this complaint from several people when I visited a food pantry run by a non-profit organization.
7. Associated Press, “House GOP Considers Food Stamp Work Requirements, Cutting Spending for Feeding Program,” The Washington Post, July 24, 2013.
8. Associated Press, “House GOP Considers Food Stamp Work Requirements, Cutting Spending for Feeding Program,” The Washington Post, July 24, 2013.

Food as a Human Right: A Basis in Rousseau

The natural right to food unconditionally in society is based, I contend, on the assumption that it is because a person without food is in society that he or she is going without. In other words, were he or she in the state of nature, acquiring enough food would not be a problem. Rousseau makes this point in his Discourse on Inequality[1].
Jean-Jacques Rousseau (1712-1778)  Source: Wikimedia Commons.
Basing a human right to food on Rousseau’s philosophy risks the criticism that rights cannot possibly exist in the philosopher’s beloved state of nature, as rights depend on there being a government. However, Rousseau adopts wise Locke’s notion that one’s labor added to land makes it one’s property as a matter of right even without the institution of government. For my purpose here, it is enough to claim that a food-sustenance is a human right in political society. It is precisely on account of how that society differs from the state of nature than the human right is necessary only in society.
“As long as men remained satisfied with their rustic cabins; as long as they confined themselves to the use of clothes made of the skins of other animals, . . . ; in a word, as long as they undertook such works only as a single person could finish, and stuck to such arts as did not require the joint endeavours of several hands, they lived free, healthy, honest and happy, as much as their nature would admit, and continued to enjoy with each other all the pleasures of an independent intercourse.”
In other words, with people being limited in production or collection to their own needs, there is likely to be enough for all. From “the moment one man began to stand in need of another's assistance; from the moment it appeared an advantage for one man to possess the quantity of provisions requisite for two, all equality vanished.” From natural differences between people even in the state of nature, as soon as some people of superior strength and industriousness desire food enough for many, perhaps to sell or give away the surplus for money or power, more scarcity than is due to nature is apt to set in for other people not so constituted.
With more labor necessary to produce or collect a surplus beyond one person’s own needs, “boundless forests became smiling fields, which it was found necessary to water with human sweat, and in which slavery and misery were soon seen to sprout out and grow with the fruits of the earth.” With artifice being superimposed on nature’s provisions that otherwise are open to all, the output is skewed in distribution toward some.
Furthermore, with the economic interdependence that comes with society and an economy of different sectors and specialization of labor, the connection that everyone has to nature’s fruits is broken for many and fewer hands remain to work the land even though everyone must eat. “The more hands were employed in manufactures, the fewer hands were left to provide subsistence for all, though the number of mouths to be supplied with food continued the same.” The natural right to food as unconditional kicks in, and is due to, the fact that the must eat continues, being based on nature, even as instituting an economy puts the supply of food at risk for some. Hence, the right is natural because we must eat on a regular basis, even if people establish and superimpose an economy on nature’s fruits, distorting their relatively equal distribution. The right is a right because it is only necessary once society, including an economy and government, has taken people out of the state of nature.

On Securing the Human Right, See: "Should Charities Replace Government?"

1. Rousseau, Jean-Jacques, Discourse on the Origins of Inequality, Harvard Classics, Charles W. Eliot, ed., Vol. 34 (Cambridge: Harvard University Press,1910).

Income Inequality: Natural or Artificial?

In the United States, the disposable income of families in the middle of the income distribution shrank by 4 percent between 2000 and 2010, according to the OECD.[1] Over roughly the same period, the income of the top 1 percent increased by 11 percent. In 2012, the average CEO of one of the 350 largest U.S. companies made about $14.07 million, while the average pay for a non-supervisory worker was $51,200.[2] In other words, the average CEO made 273 times more than the average worker. In 1965, CEOs were paid just 20 times more; by 2000, the figure peaked at 383 times. The ratio fell in the wake of the dot-com bubble and then in the financial crisis and its recession, but in 2010 the ratio began to rebound. According to an OECD report, rising incomes of the top 1 percent in the E.U. accounted for the rising income inequality in Europe in 2012, though that level of inequality was “notably less” than the one in the U.S.”[3]  Nevertheless, in both cases the increasing economic gap between the very rich and everyone else was not limited to the E.U. and U.S.; a rather pronounced global phenomenon of increasing economic inequality was clearly in the works by 2013.



Accordingly, much study has gone into discovering the causes and making prognoses both for capitalism and democracy, for extreme economic inequality puts “one person, one vote” at risk of becoming irrelevant at best. One question is particularly enticing—namely, can we distinguish the artificial, or “manmade,” sources of economic inequality from those innate in human nature? Natural differences include those from genetics, such as body type, beauty, and intelligence. Although unfair because no one deserves to be naturally prone to weight-gain, blindness, or a learning disability, no one is culpable in nature’s lot. No one is to be congratulated either, for a person is not born naturally beautiful or intelligent because someone else made it so. This is not to say that artifacts of society, as well as their designers and protectors, cannot or should not be praised or found blameworthy in how they positively or negatively impact whatever nature has deigned to give or withhold. It is the artificial type of inequalities, which exist only once a society has been formed, that can be subject to dispute, both morally and in terms of public policy.
A society's macro economic and political systems, as well as the society itself, can be designed to extenuate or diminish the level of inequalities artificially; it is also true that a design can be neutral, having no impact one way or the other on natural inequalities. How institutions, such as corporations, schools, and hospitals, are designed and run can also give rise to artificial inequalities. In his Theory of Justice, John Rawls argues that to be fair, the design of a macro system or even an institution should benefit the least well off most. Under this rubric, artificial inequalities would tend to diminish existing inequalities. Unfortunately, a society’s existing power dynamics may work against such a trajectory, preferring ever increasing inequality because it is in the financial interests of the most powerful. Is it inevitable, one might ask, that as the human race continues to live in societies the very rich will get richer and richer while “those below” stagnate or get poorer? Jean-Jacques Rousseau (1712-1778) distinguishes natural and artificial (or what he calls “moral”) inequalities with particular acuity and insight. He answers yes, but only until the moral inequalities reach a certain point. Even if his “state of nature” is impractical, we can make more sense of the growing economic inequalities globally but particularly in the U.S. by applying his theory.


1.Eduardo Porter, “Inequality in America: The Data is Sobering,” The New York Times, July 30, 2013.
2. Mark Gongloff, “CEOs Paid 273 Times More Than Workers in 2012: Study,” The Huffington Post, June 26, 2013.
3. Kaja B. Fredricksen, “Income Inequality in the European Union,” OECD, Economics Department Working Paper No. 952, 2012.

Monday, October 8, 2018

Bank of America Exploited State Tax-Rate Differentials in the E.U.: Systemic Risk and Federalism Blindsided

In 2012, the corporate income tax rate was reduced from 26% to 24 percent. With the comparable rate in Germany at 29% and France at 33 percent, Britain stood to reap the revenue-benefits of a significantly lower tax rate within the European Union. That the 24% rate would be pared down to 21% in 2014 suggests that everything else equal, the state of Britain was set to reap a sustainable competitive advantage over other E.U. states with respect to attracting business, and thus jobs. The move was not without risks, however.
The move by the British could have triggered reduced rates in other states, resulting in a “race to the bottom” wherein corporations would get away with less tax and the governments would have to cut back on basic services due to insufficient revenue in the coffers. In early 2013, for example, Bank of America moved billions of pounds of complex financial transactions through London from Dublin in order to apply the loss carry-forwards on the underlying investments to the state with the higher tax rate. At the time, the corporate tax rate in Ireland was only 12% so the loss deductions could have benefited the bank more if applied against profit in Britain. As a result, that state stood to collect less in tax from the bank and the bank stood to pay less in tax--all due to the rate differential between the states of Ireland and Britain.
In short, a bank that had made horrible acquisitions in 2008 was able to “play the rates” to get some kind of “silver-lining” benefit at the expense of the E.U.’s state governments. Because of the disproportionate fiscal role of those governments in the E.U., business could effectively play them off against each other. Were there a federal corporate income tax, the benefits of shifting carry-forward losses from Dublin to London would have been mitigated because the more of the tax bill in Europe would have been unaffected. Therefore, in addition to forestalling more of a fiscal balance within the E.U. to the benefit of the euro, the reliance on state tax in the E.U. could be exploited by corporations such that less tax revenue would be collected.
In terms of business, Bank of America’s taking advantage of differential tax rates illustrates a sort of “operating at the margins.” Did this redeem the bank? Lest it be forgotten, the bank had screwed up rather unroyally in acquiring Merrill Lynch and Countrywide in 2008, given all the real-estate debt and financial derivatives held by those institutions. That is to say, any cleverness in minimizing the tax bill within the E.U. could not possibly make up for the colossal blunders at the hand of Ken Lewis and the board in 2008. The bank was even then too big to fail, meaning that there was systemic risk to the financial system (and economy) should the bank have collapsed, so any cleverness at working tax differentials should not distract us from the big picture concerning not only that bank, but also any large bank as being too big to fail and yet fully capable of making huge blunders that could compromise even a large bank's very existence. In other words, expertise in reducing the tax-bill in the E.U. does not make up for greater ineptitude because the low-probability, very high systemic risk is simply too dangerous; the Great Depression of the 1930s illustrates what could happen.
As for the E.U, it was (and is) vulnerable fiscally because its reliance on the states to collect and spend tax revenue. The E.U. Government, like the early U.S. Government, has evinced the weakness of dependency (on its states). The reticence of state officials to cede more governmental sovereignty to the Union has been at least part of the problem, with banks like Bank of America being able to exploit differential state tax-rates as a result. The welfare of the whole--the Union--has suffered as a result.  

Sources:


Jill Treanor, “Bank of America Makes Derivatives Switch from Dublin to London,” The Guardian, 28 January 2013.
Dan Milmo, “Corporation Tax Rate Cut to 21% in Autumn Statement,” The Guardian, 5 December 2012.

See also: Skip Worden, Essays on the E.U. Political Economy and Essays on Two Federal Empires.

Were Raises at Bailed-Out U.S. Companies Approved by Treasury?

In early 2013, the Special Inspector General for Troubled Asset Relief Program reported that the U.S. Treasury Department disregarded its own guidelines in order to allow large pay increases for executives at three major companies that had received bailouts during the financial crisis. In particular, eighteen raises for executives at American International Group (AIG), General Motors, and Ally Financial were approved. Fourteen were for $100,000 or more. A raise for the CEO of a division of AIG was $1 million. Treasury approved these raises even though they exceeded the pay limits set in Treasury’s own guidelines.
Was Treasury Secretary Tim Geithner smirking because his friends were happy?     NYT
In assessing Treasury’s approval of the raises, one must weigh the argument that they were needed to retain expertise needed to restore the companies to financial health (and thus be able to pay back the bailouts) against the argument that bailouts should come with strings such that the funds are not used opportunistically. At the very least, executives associated with the companies’ failures should not be rewarded. However, what about new-hires brought in to restore the companies?  If the restoration is successful, shouldn’t those managers be compensated?  Even if the raises were not necessary to retaining talent, managers who had not been part of the problem should be compensated for effective work. At the same time, it is proper and fitting that companies being bailed out be subject to strings, and thus neither the companies nor their employees should be able to benefit inordinately.
That Treasury disregarded its own guidelines can be read as an indication that the officials were concerned that vital talent would be lost had the guidelines been followed. The bailouts in the E.U. contained limits on executive compensation without any apparent hindrance to the viability of the banks. In other words, the argument that the raises were necessary to retain talent could have been a ruse. An alternative interpretation consistent with this scenario is that the business sector had too much influence over Treasury officials. In addition to lobbying influence and connections between Treasury officials and former colleagues on Wall Street, it is possible that pro-business officials had adopted the business line that government should not interfere with business—even companies being bailed out.
Put another way, contrasting the lack (or ignoring) of strings at Treasury with the salience of strings in the case of the E.U.’s bailouts may illustrate a cultural difference between Americans and Europeans generally with respect to pro-business ideology. Had executives at the three bailed out companies above enjoyed inordinate influence within Treasury, the conflict of interest for the government officials could have been enabled by a shared ideology: namely, what is good for GM is good for America.

Source:
Marcy Gordon, “Treasury Disregarded Own Guidelines, Allowed Executive Raises At Bailed-Out GM, AIG,” The Huffington Post, January 28, 2013.

See also: Skip Worden, Essays on the Financial Crisis.

Egypt: A Missed Opportunity to Interiorize Protests

How a democratic system is designed can be as important as whether the government officials have been elected or appointed. In constructing a democracy, it is not sufficient to simply hold elections. While the victors may have democratic legitimacy, the government itself may still not. Egypt amid the violent protests in early 2013 may be a case in point. Even though unlike in 2012 the sitting president had been democratically elected, it is too simplistic to say that the Egyptian government and constitution had democratic legitimacy.
In January 2013 following an Egyptian court sentencing 21 residents in Port Said to death for their roles in the stadium disaster, the chief of the army said that the ongoing violence could bring about the collapse of Morsi’s government. The opposition demanded that the president establish a nationally unified government and rewrite controversial parts of the constitution that had recently been passed. That the constitution had been pushed by religionists amid an increasingly polarized citizenry left even the democratically elected government vulnerable. It was not enough that Morsi had been democratically elected.
Particularly in a highly polarized country, simply holding elections is not sufficient to usher in a sustainable democracy. If a partisan party holds virtually all of the power in the government of a highly polarized country, the opposition will have no recourse but to resort to protests and even violence. Put another way, democratic legitimacy requires more where a citizenry is polarized in the sense of operating under very different, and thus highly conflicting, assumptions and prescriptions. In such a context, a democratic system that hands virtually all the power over to one “side” is insufficiently democratic.
This is not to say that a “unity government” is the answer. Given the polarization, any unity would be illusory. More realistically, Morsi could have viewed the sheer intensity of the violence in the protests as an indication that the new democratic system was being monopolized by one party at the expense of others. Providing them with their own bases of power within the government and democratically elected would bring in the external political strife—replacing violence on the streets with debate and negotiation between governmental institutions. The latter is not predicated on unity. Even any resulting compromise in legislative terms would not necessarily imply unity.

 Can such intense violence be "interiorized" as debate and politics in a legislature?  Government itself can be viewed as civic violence "redacted" and "refined."   Source: thestar.com
Interiorizing the conflict on the streets by permitting it with some political power within the government could be accomplished through a bicameral legislature, the chambers of which having very different bases of membership, or a qualified majority vote mechanism in a single chamber. The separation of powers could also be by government branch, with one party controlling one branch and the opposition controlling at least part of another branch.
In the U.S., for example, a Democrat controlled the White House at the time, while the Republicans controlled the U.S. House. The opposition did not have to have a share of the power in the House because the minority there had another power base within the government. Were the government completely dominated by even democratically elected Republicans, such was the case in Wisconsin after the election of 2010, activist Democrats would head for the streets. That the legitimacy of such a government can quickly become suspect in spite of its democratic basis is illustrated by the thirteen senators from Wisconsin who literally fled to Illinois so Wisconsin’s senate could not function with a quorum. Democracy involves the design of a government as much as that crucial offices are elected rather than appointed. To be legitimate democratically, the government’s design should interiorize political strife by providing a power base to more than one party.
In short, it is not sufficient for the Egyptian president and even its parliament to be democratically elected, such that one party can dominate both simply due to the numbers. Given the extent of polarization among the citizenry, such domination is doomed to failure even if the dominated party is in no hurry to differentiate power-bases within the government. Particularly in cases such as Egypt where the parties are “not on the same page,” the opposition must have some basis within the government to act as a check and thus balance out the otherwise excess possible in one-party rule. In a polarized citizenry, such excess quickly pushes the other side to extreme reactions on the street.
The task in the construction of a viable government in Egypt would seem to be providing opposition groups with enough ownership within the government without thereby providing a veto on any legislative output. As of early 2013 at least, Egypt might have to go a couple of rounds before a design is adopted that effectively interiorizes the violence.  Otherwise, splitting the country into two—one secular and the other a theocracy—might be the only viable solution (other than federalism and the sort of democratic design discussed here).  It is notoriously difficult to relocate people, however, so as to have truly distinct secular and religionist societies. Given the daylight between the two camps, however, partition, such as that which had occurred between Pakistan and India in 1947 might simply reflect the fact that two distinct nations had already come to exist in Egypt. If so, it is the fossilized nature of a defined country that may be the underlying obstacle to Egypt catching up with itself.

Source:
Egypt Political Factions Condemn Violence, Urge Dialogue,” Deutsche Welle, January 31, 2013.

Sunday, October 7, 2018

On Democratic Accountability in a Republic: The Pentagon Papers


The publication of portions of the Pentagon Papers despite President Nixon’s threats of treason highlighted the fact that four presidents successively lied to the American People on build-up of U.S. involvement in Indochina (most notably, Vietnam) and the Nixon administration lied on the prospects for victory in the Vietnam War—a war that had not even been declared by Congress. Clearly, democratic accountable extends to foreign policy at least in broad outline, such as in whether or not to continue an active engagement militarily in another region of the world. Even in U.S. presidents being able to get away with effectively declaring war even as one of their roles is that of commander-in-chief—a huge conflict of interest!—democratic accountability by the popular sovereign, the People—is important, even vital should the legislative and judicial branches fail as checks in the separation-of-powers feature of the U.S. Constitution.
The first article in the New York Times reported that the Truman, Eisenhower, Kennedy, and Johnson administrations “built up the American political, military and psychological stakes in Indochina, often more deeply than they realized at the time, with large‐scale military equipment to the French in 1950; with acts of sabotage and terror warfare against North Vietnam beginning in 1954; with moves that encouraged and abetted the overthrow of President Ngo Dinh Diem of South Vietnam in 1963; with plans, pledges and threats of further action that sprang to life in the Tonkin Gulf clashes in August, 1964; with the careful preparation of public opinion for the years of open warfare that were to follow; and with the calculation in 1965, as the planes and troops were openly committed to sustained combat, that neither accommodation inside South Vietnam nor early negotiations with North Vietnam would achieve the desired result.”[1]
Meanwhile, the American electorate was being kept in the dark—lied to—in spite of the fact that the People in a republic are tasked with holding the elected representatives and their respective appointees accountable.
“The Pentagon study also ranges beyond such historical judgments. It suggests that the predominant American interest was at first containment of Communism and later the defense of the power, influence and prestige of the United States, in both stages irrespective of conditions in Vietnam.”[2] The U.S. Government’s defense of the escalation, however, was limited to the containment of Communism such that it would not take over the world as Marx had foretold and thus threaten even the U.S. itself. During the Johnson and Nixon administrations, American troops were being killed and taken prisoner increasingly for the prestige of the United States and irrespective of the intractable conditions on the ground in Vietnam. Crucially, these administrations kept the American people in the dark on these points, such that no electoral correction could be effected. Ironically, the administrations were claiming to protect democracy even as they were undermining it by using power to subvert democratic accountability by the popular sovereign (i.e., the electorate).


1. Neil Sheehan, “Vietnam Archive: Pentagon Study Traces 3 Decades of Growing U.S. Involvement,” The New York Times, June 13, 1971.
2. Ibid.

Friday, October 5, 2018

Deaf-Signing at Mandela's Memorial and Kavanaugh's Confirmation FBI Probe: Cover-Ups?

Watching U.S. President Barak Obama speak of his hero, Nelson Mandela, on December 10, 2013, something was distracting me; the rather large man signing for the deaf used such exaggerated gestures I had trouble concentrating on what Obama was saying. Little did I know that the interpreter was a “fake,” according to the Deaf Federation of South Africa. “It was horrible; an absolute circus, really, really bad, Nicole Du Toit, an official sign language interpreter, told the AP. “Only he can understand those gestures,” she added.[1]  I suspect that labeling the fiasco a “circus” skates over the underlying mentality in over-reaching and lying to cover it up. Years later, I wondered the same thing concerning Brett Kavanaugh's nomination to the U.S. Supreme Court. Are we, the public, out of the loop concerning what really goes on inside governments? 
As soon as I read that the interpreter is a fake, I suspected that the South African government fronted the man so to appear sophisticated to the world. I recalled how just hours after Nelson Mandela died, “spontaneous” dancers in formal black dresses preformed outside Mandela’s house. I had the sense of self-aggrandizing people behind the scenes taking advantage of the obvious publicity for South Africa.
To be sure, the interpreter would explain that he had been in a schizophrenic episode while he was signing and that he could not even remember having signed afterward. Hearing this “explanation,” I suspected that with so much on the line, powerful players behind the scene may have pressured the man to lie. One American news network showed footage of the signer using strange signs at yet another occasion. Perhaps with so many schizophrenic episodes while signing, the man might have picked another profession. I suspect the mental health explanation is a fake on top of a fraud, both indicative of a broader attempt by government officials or other power brokers in South Africa to “cash in” at the nearest opportunity, regardless of any sense of solemnity at such a momentous occasion.
In 2018, the quick FBI investigation of Brett Kavanaugh's past sexual behavior was closed to the public even as U.S. senators relied on the findings, at least in part, before voting on whether to confirm him as a justice of the U.S. Supreme Court. The private nature of the report opened up the possibility that a cover-up between the Republican Party and the FBI was in the works. According to an opinion-piece at CNN, numerous sources who could have confirmed Kavanaugh's sordid behavior at a party at Yale were excluded from the interview list by the White House.[2] A lot was on the line; the high court stood to be conservative-leaning for decades. That such an outcome should pivot on a politicized nomination "circus" ought to raise enough concern; that the court's leaning could be due to a private report being a charade ought to make frustrated blood boil.
Both of these cases raise the unhappy possibility that what happens inside governments is effectively shielded from the public eye such that democratic accountability cannot function. The cases also raise the specter of outwardly nice public officials being in government anything but. Are we, the public, too gullible, or is it simply the case that people in positions of great power are not wielding it responsibly and able to get away with it? 


Sources:

1. Kim Hjelmgaard and Marisol Bello, “Interpreter For Deaf Branded a Fake,” USA Today, December 12, 2013.
2. Frida Ghitis, "Kavanaugh Probe Was a Cover Up," CNN.com. (accessed October 5, 2018)

Can the Federal Reserve Handle Banks Too Big To Fail?

The biggest banks operating in the U.S. reaped an estimated $13 billion of income by taking advantage of the Federal Reserve’s below-market rate of .001% on $7.7 trillion in emergency loans in the wake of the credit freeze in September 2008. Rather than using the additional funds to increase lending, the banks fortified reserves and paid bonuses out to executives. Had member of Congress had been able to anticipate all this, it is possible that they would have prescribed stronger medicine, perhaps even including breaking up the banks with over $1 trillion in assets.
As Shakespeare has Marcellius say in Hamlet in reference to moral and political corruption, “something is rotten in Denmark.” Another line could be added from Macbeth. “Out, out damn spot!” Bloomberg News reported that “the Fed and its secret financing helped America’s biggest banks get bigger and go on to pay employees as much as they did at the height of the housing bubble.”
Total assets held by the six biggest U.S. banks increased 39 percent to $9.5 trillion on Sept. 30, 2011, from $6.8 trillion on the same day in 2006, according to Fed data reported by Bloomberg. Employees at the six biggest banks made twice the average for all U.S. workers in 2010, based on Bureau of Labor Statistics hourly compensation cost data. “The banks spent $146.3 billion on compensation in 2010, or an average of $126,342 per worker. That’s up almost 20 percent from five years earlier compared with less than 15 percent for the average worker. Average pay at the banks in 2010 was about the same as in 2007, before the bailouts.”
When members of Congress were voting on the $700 billion TARP, they were being kept in the dark on the Fed’s loans. The general public was out of the loop as well. Ted Kaufman, a former U.S. senator from Delaware, said that if Congress had been aware of the extent of the Fed rescue, the knowledge “could have changed the whole approach to reform legislation,” He claims he “would have been able to line up more support for breaking up the biggest banks. More than three years after the financial crisis, Sen. Sherrod Brown of Ohio observed, “There are lawmakers in both parties who would change their votes now [i.e., in December, 2011].” Byron L. Dorgan, a former senator from North Dakota, says the knowledge might have helped pass legislation to reinstate the Glass-Steagall Act, which for most of the last century separated customer deposits from the riskier practices of investment banking. Had people known about the hundreds of billions in loans to the biggest financial institutions, they would have demanded Congress take much more courageous actions to stop the practices that caused this near financial collapse.”
The government’s response to the crisis has not significantly reduced systemic risk, even with the higher reserves requirements for the biggest banks. According to Bloomberg, “Kaufman says some banks are so big that their failure could trigger a chain reaction in the financial system.” For so few banks to hold so many assets is “un-American,” says Richard W. Fisher, president of the Federal Reserve Bank of Dallas. “All of these gargantuan institutions are too big to regulate,” he continued. “I’m in favor of breaking them up and slimming them down.” Oliver William, an economist, concluded that the “banks that were too big got even bigger, and the problems that we had to begin with are magnified in the process.” A conflict of interest may be part of the underlying cause.
It could be that the bankers at the Federal Reserve Bank have been overly friendly to the bankers getting the funds. This conflict of interest could expose the Fed to losing lent funds should one or more of the troubled banks become insolvent and with insufficient collateral. Therefore, in an attempt to make the Fed accountable in regard to its emergency lending,  Congress included in its Dodd-Frank legislation (2010) requirements stipulating that the Fed develop and submit guidelines regarding selection criteria to be applied to banks seeking emergency loans and requirements by which bank collateral is to be reckoned as sufficient.
The publication of selection criteria would reduce the risk of moral hazard. The cost of borrowing for so-called too-big-to-fail banks is lower than that of smaller firms because lenders believe the government won’t let them go under. The perceived safety net creates what economists call moral hazard—the belief that bankers will take greater risks because they’ll enjoy any profits while shifting losses to taxpayers.” Jeremy Stein, a Fed governor, has spoken of moral hazard, according to the New York Times, as “the belief that government support can subsidize banks and make them less careful about the dangers inherent in their businesses.” Depending how strict the selection criteria are, “the banks might then realize that the Fed will not be a pushover in times of market stress.” At least as of April 2013, the Fed had not followed through on the mandate in Dodd-Frank that the Fed promulgate rules.
The Fed might have good reason to stave off rules that could restrict the Fed’s flexibility in a crisis. “The Fed might be thinking, ‘We don’t want to make a lot of rules that might hinder us from acting in an emergency situation that we can’t anticipate,’” Michael Bradfield, a former general counsel at the Fed, remarked. “I think the Fed should have reasonably broad discretion to deal with systemic issues,” he continued, “(b)ut then the question is, What’s systemic and what’s really needed, and what conditions ought to accompany that lending?” Demanding too much in collateral, for example, might mean that some very big banks that are hemorrhaging capital might not qualify for an emergency loan and go under as a result. If those banks are too big to fail, the entire financial system could follow suit.
Unfortunately, discretion at the Federal Reserve could enable the “insider” conflict of interest to be exploited. Such exploitation is likely from the banking lobby as well as from the Federal Reserve. Bloomberg reports that “(l)obbying expenditures by the six banks that would have been affected by the legislation rose to $29.4 million in 2010 compared with $22.1 million in 2006, the last full year before credit markets seized up—a gain of 33 percent, according to OpenSecrets.org, a research group that tracks money in U.S. politics. Lobbying by the American Bankers Association, a trade organization, increased at about the same rate.
In a rare glimpse of how the banking lobby operates, there is evidence that the lobbying firm Clark Lytle Geduldig & Cranford sent a memo to the American Bankers Association expressing worry that the Occupy movement and the Tea Party movement might find common ground and become a potentially potent threat by joining forces. Tellingly, the memo’s writers reveal how even potential threats to big business are relegated: “If we can show they have the same cynical motivation as a political opponent it will undermine their credibility in a profound way.” Using the media outlets, the “messengers” of powers vested in the status quo can quickly discredit others, as if from a popular wave of mass opinion. Meanwhile, the matter of the very existence of the banks too big to fail continued to float below the radar—the media dutifully transmitting the transparent issue of tents and evictions in various cities. In other words, even the occupiers—the anarchists outside the system!—allowed themselves to be played. Perhaps we are all being played.


Sources:


Bob Ivry, Bradley Keoun, and Phil Kuntz, “Secret Fed Loans Gave Banks $13 Billion Undisclosed to Congress,” Bloomberg Markets Magazine, November 27, 2011.
Peter Eavis, “Fed Still Owes Congress a Blueprint on Its Emergency Lending,” The New York Times, April 23, 2013.

Skip Worden, Essays on the Financial Crisis, available at Amazon.