In Defense of the Tea Party

In the wake of the U.S. House’s “Tea Party” caucus in the Republican caucus on July 28, 2011, which effectively delayed the Speaker’s bill for raising the debt ceiling, it might be useful to row against the current for a moment if only to present a defense of the Tea Party’s agenda. To be sure, problems exist in it, but a defense can be made. I submit that the media has not been particularly accurate, or fair, concerning the movement or its involvement in the U.S. Government.

Most notably (but not obviously), Tea Party representatives are correct that August 2^nd does not necessarily bring with it default, for that refers only to the Treasury department not making the required interest and principal payments on the debt. That some government agencies have to shut down does not constitute default, for the latter pertains ONLY to serving debt. Indications are that the U.S Government could service its debt August from incoming tax revenue. If so, default would only be voluntary—if the Treasury should decide to use the tax revenue for other uses.

It is more accurate to say that delaying raising the debt-ceiling would increase the likelihood that the U.S. Government’s credit rating will be lowered to AA from AAA. On this front, the refusal to compromise can be excoriated. For its part, the Tea Party might say that it is worth risking if a structural re-alignment could occur.

What does the Tea Party really want: a reduction in government or a reduction in the federal government? Or both? Other things equal, I suspect that the party would prefer a given domestic program to be at the state level, but even there the spending (and taxing) would receive some ire. If the goal is primarily to restore federalism, the Tea Party is on firmer ground. Since the CSA-USA war (1861-1865), the United States has been trending toward political consolidation at the expense of the innate diversity coming with an empire-scale. Nothing—not even Ronald Reagan and his Supreme Court—could turn the tide. One could not blame the Tea Party for saying: if not now, when? Indeed, the existence of a $14.3 trillion U.S. Government debt—roughly the amount of the annual GNP—can be viewed as a manifestation, or symptom, of the imbalance.

So it makes sense to pick the debt-ceiling as the matter on which structural adjustments can be made. However, what if the majority of the people, or branches, prefer consolidation to federalism in any meaningful sense? Is it fair to foist a structural shift on the majority? Would not it be fairer to promote a constitutional amendment directed on the question of federalism?

Of course, the Tea Party representatives could simply be opposed to the debt, and therefore of increasing it. If it is unsustainable already, then raising the debt ceiling might make matters worse even if it assuages short-term difficulties. If the leverage possible in a debt-ceiling decision is given up, there might not be another chance to stop the trend of more and more debt being added to what is already unsustainable. Rather than force massive short-term spending cuts in federal programs and agencies, however, the leverage could be used to agree to longer-term cuts, say over ten years. This is what the Tea Party has been for, though at the risk of short-term shock.

However, it could be countered that were the Tea Party really focused on reducing the debt, the objection to increasing tax revenue, especially for the rich whose effective rate is eighteen percent, would not exist. That is to say, even if citizens and residents are being taxed too much, it is not too much relative to the debt (past spending that was borrowed). This is different than saying that spending should be cut, for that applies to current and future deficits. An enhanced Tea Party position would be to come down hard on the debt (and further deficits), and thus be for both spending and revenue means of closing the gap. Even combined, it will be difficult to pay off the $14.3 trillion.  From this perspective the spending/revenue debate is premised on a false dichotomy wherein one or the other is assumed to be sufficient. The magnitude of the debt relative to GNP—the highest since the end of WWII in the twentieth century—suggests that the Tea Party is not radical enough.

Compromise in Congress Impeded by Empire-Scale Federalism

While it may take much effort and skill to compromise on disparate budget numbers, whether to have a public health-insurance option for the poor or sick, and whether to add regulations for the biggest banks, these compromises are actually rather narrow relative to the political-ideological spectrum. Broadening out the poles could include adding revenue considerations to the differences on spending, replacing private health insurance companies with an expanded Medicaid/Medicare program, and breaking up the $1 trillion plus banks. It could also include a balanced budget amendment complementing drastic spending cuts, having the state governments decide whether Medicaid and Medicare continue as state rather than federal programs (and how), and deregulating the financial sector further. Were public officials to enlarge the domain subject to compromise, compromise itself would be more allusive even as more positions would be represented.

The complete essay is at Essays on Two Federal Empires.

Bad Psychology and Political Violence: A Toxic Cocktail

Before the assassination attempt on Rep. Gabrielle Giffords in early 2011, it had been quite some time since there had been a major assassination attempt on American soil. The attempt on President Reagan had been almost thirty years earlier. During the intervening time, the naive view that American politics had outgrown such barbaric acts of political violence could grow and thrive. Then in July 2011, the world witnessed an anti-Muslim European go on a shooting spree in a delusional sense of being at war. In his mind, there was an actual war and his acts were justified. In fact, he viewed himself after the fact as a savior. Undoubtedly, there was no internal check in his mind for how far his sense of political reality could get from the “facts on the ground.”

To be sure, there are some political crazies out there, and they are not necessarily mentally ill. If you have ever been to a public political speech or event, I would be surprised if you didn't notice a few people who seemed unseasonably animated or perhaps simply odd--their quirks being brought out by the political nature of the event. I am not referring to simply voicing a different point of view here, or even expressing some emotion that could be reasonably expected in a political context. So I am not pointing simply to people exercising their first amendment right of free speech--a right that cannot insist on conformity of opinion. Rather, what I am getting at is the inordinate expression of emotion, which doesn't seem to fit with what one would make sense in coming from the political context. It is only natural in observing a person evincing odd behavior to suspect something else in play—something idiosyncratic to the person's psychological condition.

When uniqueness or quirkiness goes further to schizophrenia, the mix of mental illness with politics seems to be a particularly toxic cocktail. Sadly, there seems to be little or no self-restraint in the minds of many untreated schizophrenics; the quirky person, having a tenuous grasp of political reality, can unexpectedly make a beeline to “taking matters in one’s own hand.” Public officials—and the rest of us—must undoubtedly keep this point in mind.

Of course, I could simply be observing that society contains people who are not of the familiar norm. Perhaps going to a political rally or speech proffers a chance to see just what our society looks like, beyond one's circle of friends, co-workers and family. Coming out of our homes and work environments, away from our friends and family, we find that there exist people in the broader society who are "different" from us. That is to say, we realize that not everyone is like us psychologically. Of course, this doesn't mean they are crazy. "Different" must be distinguished from "emotionally disturbed." Even so, it must be admitted, I think, that there are disturbed people who react in a political situation much as an alcoholic might in being at a party. Most people at a party chat and laugh, dance and eat, but then there is the person who loses control and behaves in a way not accounted for by the context.

In the case of Rep. Giffords, the suspect was by several accounts a very troubled man. The New York Times described the suspect in court as being "wide-eyed."[2] At the defense table, "his eyes darted back and forth and his mouth curled up at one point into a quick smile."[3] He had been kicked out of college after having been disruptive in several classes. In the case of the shootings in Norway, the suspect’s own lawyer admitted that the guy was insane to believe he was fighting a real anti-Muslim war in Europe. I suspect that were you or me to talk with either suspect, we would be shocked as to how different (not just strange) their versions of political reality are; we might be surprised that individuals with such an unchecked-warped view of social reality could function in society. We might wonder why such persons are not in a more structured environment. Society itself may be too loose—too tolerant.

The “live free or die” attitude in modern society and the associated right of free speech should not be an excuse for a society to allow untreated schizophrenics to evade treatment. If they want the freedom to be sick, society has a greater right (and obligation) to protect the sick and the society. We need to question the right of untreated mental illness in society, as though there were a right to be sick wherein there other people are put at risk. Structured living arrangements, for example, could be required—with less structure available in exchange for accepting meds. If psychologists were required to treat poor malcontents in society pro bono as part of the license to practice, society itself would look much different and we would all be among the beneficiaries.

1. Huffington Post, “Anders Behring Breivik, Oslo Terror Suspect, Asks How Many He Killed,” July 26, 2011. 
2. Marc Lacey, “Shooting Suspect Waives Bail and Is Ruled ‘a Danger,’” The New York Times, January 10, 2011. 
3. Ibid.

Presiding over a Debt Precipice: President Obama of the U.S.

In the context of a rapidly approaching deadline on increasing the ceiling on U.S. Government debt, Barak Obama found himself rebuffing pressure from anti-tax “Tea Party” Republicans in the U.S. House while needing enough non-partisan credibility for his warning of an impending economic catastrophe to be believed by the citizenry and Congress. That is to say, Obama’s failure to stand back as the Democrats and Republicans in Congress duked it out on spending cuts and tax increases mitigated his stature or credibility as Presider in Chief. An editorial in the New York Times refers to this role of the president as "the utimate guardian of the constitutional order."[1] To preside is to be oriented to the viability of the whole. This means stepping in when the system itself is at risk. Partisan involvement compromises the ability to function in a failsafe capacity, as the "ultimate guardian."

Concretely, as the deadline on raising the debt-ceiling approached, someone with credibility was needed to stand up and get the attention of the partisans to say: We are running out of time. You need to come to an agreement. Taking and advancing one of the sides of the dispute detracted from Barak Obama’s ability to act as the party oriented to the deadline itself. It left the deadline itself vulnerable because the role designed to protect it was also interested in advancing a certain agreement (and killing another). I contend, therefore, that Obama’s priorities were at odds with that of how his office is designed to function in the system. The system itself is left vulnerable.

By analogy, a fire inspector is hired to sit in a crowded theatre to keep an eye on the building in case one of the special effects of the play causes a fire. Keeping an eye on the theatre itself, including backstage and the balcony, is less interesting than watching the plot unfold on stage. Taking the side of the protagonist, the inspector is diverted from noticing the smoke at the back of the balcony. The theatre, and its occupants, are at risk because the inspector does not reach the stage in time. To be sure, watching a play is more interesting, but the inspector role is designed to look out for the people as a whole—indeed, the theatre itself. Now, say the theatre is host to a debate, and that the inspector steps on stage to take part in it. Not only is he or she distracted from keeping an eye out for sabotage, people in the audience favoring the other side on the debate might not believe the inspector’s eventual announcement that they must leave the building.

In 2010, Barak Obama had remarked to the press after a partisan meeting with Congressional leaders, “Being bipartisan cannot mean that Democrats give up everything they believe in, find the handful of things that Republicans have been advocating for, and we do those things, and then we have bipartisanship.”[2] Even as his statement sounds fair, to make it from a partisan position from the presidential podium undercuts the presiding nature of the Presidency. How might Republicans have reacted to the President had he then announced an emergency and indicated what needed to be done to avert disaster? While his detractors would probably not doubt his veracity, in the face of an impending disaster every bit of credibility that the Presidency itself is capable of is necessary.

In the context of the debt-ceiling showdown in July 2011, the president’s pushback against the House Republicans compromised his warning that “we are now in the eleventh hour; we don’t have time for smoke and mirrors.”[3] Whereas the warning is oriented to the deadline, the pushback was partisan in nature. What would prevent Republicans from assuming that the “smoke and mirrors” comment was just as partisan (and thus could be safely relegated or dismissed)? The president would have been better advised to let the Democrats in the U.S. Senate fight the partisan battle with the Republicans in the House while he, the presider in chief, saved his political and reputational capital to act as an alarm clock, for there is no other than the president. In effect, wanting it both ways (pushing one of two sides and sounding the alarm) is like putting a pillow over the clock. In the case of the debt ceiling, America could not afford sleeping in. In allowing our presidents to be so partisan, We the People rack up tremendous systemic risk without realizing it. It is as though we have forgotten the old question, Who is watching the store? We simply assume the status quo, wherein the store's very existence is not in question.

1, Eric A. Posner and Adrian Vermeule, "Obama Should Raise the Debt Ceiling on His Own," New York Times (July 22, 2011). 
2. Helene Cooper and Carl Hulse, “Two Parties Join Together, Then Resume Divided Ways,” New York Times, February 9, 2010. 
3. Eric A. Posner and Adrian Vermeule, "Obama Should Raise the Debt Ceiling on His Own," New York Times (July 22, 2011). 

Risking Default of the U.S. Government: Other Priorities

In mid July 2011, as several of the American states were in the midst of a heat-wave, the showdown on the debt-ceiling was becoming hot in Washington, D.C. The “heat index” on default was steadily rising with no end in sight. The refusal of republican representatives in the U.S. House to automatically increase the debt-ceiling had prompted unprecedented attention on what had been treated hitherto as a “housekeeping matter” of the U.S. Government. The attention can be referred to as a “fiscal moment.” Whereas a “constitutional moment” is one in which a citizenry’s attention is momentarily galvanized on a particular constitutional question, a “fiscal moment” is a window wherein heightened popular attention of the citizenry enables a societal recognition of what had been vaguely understood and recognized as a long-standing fiscal tendency or pattern.

The prospect of default by the U.S. Government was dire indeed. Talking to U.S. Senate leaders, Secretary of the Treasury Geithner said, as later recounted by Sen. Reid, “default would result in a complete ‘loss of capacity to function as a government.’ If this country defaults on its obligations, it will be ‘much worse than the Great Depression, and it would make the massive financial crisis of 2008 look mild. It will make what we just went through look like a quaint little crisis.’”[1] Sen. Reid concluded from the Secretary’s remarks, "Those who say this crisis would be a blip on the radar are wrong. Default would be a plague that would haunt our nation for years to come. Our credit rating would take years to rebuild. The country would never be the same."[2] In the context of this awareness of an impending yet self-inflicted catastrophe, the failure of the “players” in the Congress and Obama administration to mitigate rather than exacerbate real differences of opinion within the citizenry was apparent.

Perhaps not coincidentally, the attention of a crisis announced and solved at the last minute would serve the interests of, and be practically irresistible to a politician. Add to the mix a perplexing tendency to acknowledge what the catastrophe would bring and yet assert other priorities—of value to be sure—over that of extending the debt ceiling. Allowing other priorities to get in the way of an agreement oriented principally to obviating default is so perplexing that it raises the question of societal dysfunction and compromised representative democracy. That is to say, are We the People mature enough to self-govern when so much is at stake?

An accumulated public debt of over $14 trillion (plus $68 billion among the states) points to a basic imbalance, ultimately of values and rooted in psychology and its related culture. External discipline, while a tacit admission of self-government, is necessary where such an imbalance is countenanced, and perhaps not even recognized at large until a jolting fiscal moment of self-serving attention. One means of external discipline is a balanced budget amendment. To better understand, the rationale for this crutch, I discuss the ailment that is compromising our self-governance. The sickness is most apparent where incredulous claims are represented as taken-for-granted facts of reason.

Even in the context of a U.S. debt of over $14 trillion, and especially when an upcoming solvency deadline was looming, the question of whether the rich should contribute more in taxes was being allowed—incredibly—to prevent an agreement that would obviate default. Rationally speaking, it does not make sense to believe that default would be catastrophic while objecting to a solution because those who can pay more would face higher taxes. If something is crucial, it does not make sense to hold up because someone who can do something refuses because it is not convenient. At the very least, this evinces a problem of priorities, if not garden-variety selfishness at the expense of the public weal.

Put differently, if averting catastrophe is not enough of an incentive for people who can afford higher taxes to let an agreement go through with revenue increases as well as spending cuts, then closing the budget gap can be expected to be nearly impossible politically. “We have a terrible track record, Republicans and Democrats alike, of promising to get our spending under control and never doing it,” Senator Coburn (R-Okla) said on July 17, 2011.[3]  He could have added that the politicians do no better at getting their revenue in line with what they have decided to spend.

During the Bush administration (2001-2009), for example, the federal debt went from $5 trillion to $10.5 trillion because neither the Iraq and Afghanistan wars nor the prescription-drug benefit program were “paid for,” while tax cuts reduced federal tax revenue. This disconnect between spending and revenue, as well as the convenient decisions to spend borrowed funds, suggests that some form of external fiscal discipline. President Obama’s disclaimer that no such discipline, such as in the form of a balanced budget amendment to the U.S. constitution, is needed rings hollow. Even beyond the fiscal policies of the Bush administration, the pattern of debt-ceiling increases belies Obama’s claim.

We as a people, and our elected representatives, do not have sufficient discipline (and priorities) on our own. A balanced budget amendment, with a two-thirds majority in both bodies of Congress and a presidential signature necessary to go into debt (e.g. for an emergency such as to fight an invasion), ought not be so dismissed out of hand by such a people just because it would require us to confront our long-standing habit of living beyond our means governmentally.

The denial concerning the need for imposed or external fiscal discipline is itself indicative of the psychology sustaining the budgetary problem. It is to be expected that those used to spending beyond revenue levels would object to external discipline, but for officials to claim that such discipline is not necessary borders on recklessness. To be sure, a few years of preparation and adjustment would be needed for the Congress and president to get the U.S. Government’s spending and tax levels closer into line, and it is unlikely that such a task would be accomplished. The likely refusal to close the gap even to forestall a jarring adjustment is itself a testament to the need for the amendment. Even then, I predict that we would allow other priorities, such as the interests of the wealthy as well as debates on the size of government, to get in the way.

In other words, we, the American people, are not even close to a mentality capable of suitably managing our Union’s fiscal matters. We are like a bike tire out of balance and yet we seem to refuse even to recognize it. If there is to be recovery from our comfortable brain-sickness, a jolt, such as that which a balanced budget amendment could proffer, may be necessary.

Barak Obama’s claim that external fiscal discipline is not necessary and the republican decision to put the Bush tax cuts for the rich, a desire for a smaller government, and the (putatively tax-cut-related) priority on economic growth above an August 2, 2011 deadline on the debt-ceiling BOTH point to a serious underlying psychological (or, at the very least, political) problem inhibiting our collective ability to get the fiscal house of our Union in order. Given the magnitude of the problem, our distractedness and denial says a lot finally about us as a people and whether we are adequate to self-governing. If our representatives were inventing a crisis in order to be viewed in the end as the saviors after having stirred up attention on themselves, We the People could perhaps do much better; we might reconsider how we approach our exercise of popular sovereignty on election day. We blame one party or the other at our own peril, as we are the sovereign and are ultimately responsible as one people. Are we something more than distracted, blaming, angry, and selfish? 

1. Michael McAuliff, “Tim Geithner: U.S. Debt Default Means ‘Lights Out’ and a New Depression, Treasury Secretary Warns,” [sic] The Huffington Post, July 18, 2011.
2. Ibid.
3. Eric Lipton, “Both Sides Confident on Deficit Talks Despite Impasse,” New York Times (July 17, 2011).

Jamie Dimon of JPMorganChase Exploits an Institutional Conflict of Interest

U.S. Treasury Secretary, Tim Geithner, said on July 18, 2011 that he was not concerned about dire warnings from Jamie Dimon, CEO of JP Morgan Chase, a bank that was too big to fail and thus evinced systemic risk. Jamie Dimon, CEO of JPMorgan Chase, said the government regulations may have been suffocating the economic recovery. While it was nice of Jamie Dimon to be so civic-minded as to want to protect the recovery, his real objective was likely to increase his bank’s profitability through relaxed financial regulations in the U.S. If so, his ulterior motive was not in line with the economy overall, much less with society and the common good.

The full essay is at Institutional Conflicts of Interest, available in print and as an ebook at Amazon.

Voluntary Greek-Debt Maturity Extensions: A Rush for the Exits?

As the E.U. was working out more loans for Greece in summer 2011, rating agencies looking at the state’s debt indicated that default would be pronounced should the decision of bond-holders to continue to hold Greek bonds be anything less than voluntary. Germany had been pushing for something less than voluntary so taxpayers would not have to bear so much of the risk and cost. France, doing the bidding of its banks, effectively used the rating agencies’ default-guidelines to insist that additional E.U. loans do not require then-current bond-holders to agree to later maturities. Given the extent of Greece’s debt-load relative to the state’s GDP, a private sector bond-holder, such as a bank, would naturally loose little time in getting out of holding Greek debt, even given the high interest rates (which reflect the risk).  

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.

European Banks Ignoring the E.U.

As banks based in the empire-scale E.U.'s state of the United Kingdom decided to pull back their operations around the world in mid 2011, the bankers may have overlooked key distinctions between their banks’ operations within the E.U. and internationally. Besides ignoring the converging impact of E.U. financial regulation within the E.U., the bankers were discounting the proposal of European Central Bank President Jean-Claude Trichet for a European rating agency. The proposal implies that certain advantages can be had for the E.U. as a whole—benefits that Lloyds, for example, implicitly discounted to the extent that the bank treated pulling back in the states of Ireland, the Netherlands, and Spain similar to pulling back in Dubai, which is not an E.U. state.

The full essay is at "Essays on the E.U. Political Economy," available at Amazon.