No State Left Behind: American Education Eclipsing Federalism

Facing a federal requirement that every student be proficient in math and English by 2014, the member-states in the U.S. rushed to apply for waivers in 2011 and 2012. In 2010, 38 percent of the schools had failed to meet their goals for annual progress toward the 2014 goal. The U.S. Secretary of Education thought that figure could soar to 80 percent. When a school fails to meet such goals, the No Child Left Behind law requires “a series of interventions by the district and the state that can culminate in a state takeover. With so many schools failing, “that threatened to create an impossible burden on states and districts,” according to Chester Finn, director of an institute that studies education.[1] The waivers did not come without strings, however. The Obama administration pushed the governments to measure teacher performance, and put increased emphasis on low-performing groups as well as on the lowest-performing schools.

While the waivers can easily be seen as an effort to put the Obama administration’s own priorities on legislation from a prior administration, the Secretary of Education, Arne Duncan, claimed that his aim was to get out of a bad law that could overwhelm states that don’t measure up. “Our goal with this waiver process, frankly, has always been to get out of the way of states and districts,” he said.[2] If this were so, however, he would not insist on negotiating for better terms in granting the waivers. Beyond this extent of intervention, that of the No Child Left Behind law requiring “interventions by the district and the state” with failing schools interlards the U.S. Government in a domain that is constitutionally reserved to the states. Absent the enumerated (i.e., listed) powers of the federal government, the fifty republics are sovereign states. While the Congress can spend in the general welfare of the political and monetary union, strings beyond the general purpose trigger a breach of the constitutional design, which should give the republics enough power to act as a check on the other system of government—that of the union itself. That is, specifying down to district intervention meddles inordinately in a state’s system of government to implement federal law.

In terms of education, the role of the U.S. Government should be oriented to regulating the interstate aspects, such as making sure that students are not deprived of equal protection (e.g., not discriminated against) and that out-of-state students are not gauged at the university level. Any spending should come attached to a general purpose (which I believe must be within an enumerated power, especially if there are any strings attached), rather than with requirements for implementation (or penalty). Should a republic not spend the money in line with the purpose (especially if that purpose lies within one of the sovereign domains of the member states), the federal government could sue to get the money back. If this seems to restrict Congressional power unduly, it may be that the federal power had gone so far beyond what is consistent with a federal system that what seems drastic is merely what is necessary to get back in line with it. In terms of failing schools, the underlying problem may be that Americans (i.e., including parents of school children) do not value self-discipline (i.e., at the expense of instant gratification) or education itself enough. Imposing federal requirements and penalties are doomed to fail against such societal disvalues. In other words, we are trashing federalism for nothing.

1. Richard Perez-Pena, “Waivers for 8 More States from ‘No Child Left Behind,” The New York Times, May 30, 2012.

2. Ibid.

Eurobonds for Stimulus Spending

Meeting on May 23, 2012, the E.U.’s European Council failed to come up with a plan to offset the recessionary aspect of Greece’s budget cuts. The pressure was on; the OECD had just warned that the E.U. go back into recession. Interest rates on state debt-namely that of Spain—had reached an unsustainable level the week before due to concern regarding banks based in the state. Besides the debt and banking vulnerabilities at the state level, the E.U. itself was struggling with its political weakness, which can be attributed to the states’ rights (or euro-skeptic) ideology that was not exactly going away in the context of the debt-contagion that had prompted the establishment of a permanent E.U. bailout fund for states in over their heads on debt. In this context, the European Council was at the intersection of debt, banking and political problems.

The full essay is at Essays on the E.U. Political Economy, available in print and as an ebook at Amazon.

Facebook’s IPO: Morgan Stanley’s Conflict of Interest

Morgan Stanley’s underwriting of Facebook’s IPO has been thought by some of the bank’s rivals to be incompetently managed.  According to the New York Times, “(r)ival bankers and big investors have complained that Morgan Stanley botched the I.P.O., setting the price too high and selling too many shares to the public.”[1] Interestingly, the incompetence is positively correlated with unethical policy decisions at the bank. Even as the bankers as underwriters were eager to sell lots of shares, they may have given some of their institutional customers—albeit only the most preferred, as per the bank’s other services—some privileged information. If this charge is true, the conflict of interest at the bank should be closely examined by Congress and any relevant regulators.

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

1. Evelyn Rusli and Michael De La Merced, “Facebook I.P.O. Raises Regulatory Concerns,” The New York Times, May 22, 2012.

Wealth and Happiness American-Style

The Organization for Economic Cooperation and Development released an up-dated version of its Better Life Index in May 2012. The U.S. ranked first in income, with average household wealth at $102,000, as well as in housing (Americans spending about 20% of their disposable income on it—the OECD average being 22%).[1] These figures for the U.S. could have been pushed upward by the fact that at the time, the very rich were richer than their counterparts in other countries, for the gap between rich and poor was relatively high in the U.S. For example, 30 million Americans were without health insurance and a record number of Americans were receiving a governmental subsidy for food. Rather than assume that the middle and lower economic segments in the U.S. were better off than their counterparts in other regions of the world, I suspect that the statistics reflect the higher relative pay of American executives and professionals (lawyers, physicians and CPAs). The typical CEO in the E.U., for example, made less than his or her counterpart in the U.S.  This caused trouble in the Chrysler-Daimler merger because the Chrysler executives enjoyed higher compensation even though Daimler was in charge.

Interestingly, the rank of the U.S. in life satisfaction was above average, with 76 percent of people reporting having more positive than negative experiences in an average day (the average in the OECD index being 72%). In other words, the gap between the rich and poor does not appear to have gotten in the way of life-satisfaction. Although economic reductionism is particularly salient in the U.S., such satisfaction does not reduce to dollars and cents. Even in economic terms, the large gap between the rich and poor includes geographic distance. For example, court-orders have had to be used to force some cities and towns to allow subsidized (low-income) housing. Meanwhile, it is not uncommon, particularly in Florida, for people with money to live in gated communities. With the rich out of sight, the poor are less likely to be aware of the economic inequality, which could otherwise put a damper on their life-satisfaction.

As a final observation, my reference to Florida suggests that the OECD should not generalize all of the American states into one figure. For example, life-satisfaction is likely to be higher in Hawaii than in Alabama or Michigan for climatic or economic reasons (or in North Dakota during the winter even considering the economic boom). Housing in New Hampshire is, in general, better than in Mississippi. Income in Connecticut is higher on average than in Arkansas. For states, whether in the U.S. or E.U., to be in a union is not to say that they are identical and thus readily grouped together. In other words, a general statistic in housing or income has less real meaning when applied over such a large area. It is like saying that the average temperature in the U.S. in 2011 was 56 degrees (I don’t know the real figure). It is unlikely that figure applies in any state—certainly not in Florida, Hawaii, Alaska, or Maine. The figure has no real meaning, other than relative to other such figures over time (e.g., to assess global warming). For the OECD to compare the U.S. as a whole to E.U. states such as Denmark, Belgium and Spain suggests that the organization is content to engage in category mistakes. If the figures are relevant on the state level, the OECD should be consistent rather than selectively over-generalize.

1. “OECD LaunchesUpdated Version of Your Better Life Index,” OECD. 

See also MSNBC, “US Ranks No. 1 in Wealth, Not in Happiness.” 

"Real Change" Belied: Lobbyists in Obama's White House

Visitor logs for January 17, 2012 show that the lobbying industry that Obama had vowed to constrain was nonetheless a regular presence at 1600 Pennsylvania Ave.[1] That's the address of the White House. Even though the president barred recent lobbyists from joining his administration or even serving on its advisory boards and forbid federal employees from accepting free admission to receptions and conferences sponsored by lobbying groups, records suggest that lobbyists with personal connections to the White House enjoyed the easiest access. The principle of fairness (not to mention consistency) seems to have been sacrificed for political (and campaign finance) expediency.

Lobbyist Marshal Matz, for example, who served as an unpaid adviser to Obama’s 2008 campaign, gained access to the White House roughly two dozen times through May 2012.[2] He brought along the general council for the Biotechnology Industry Organization, the chief executive of cereal maker General Mills and pro bono clients, including advocates for farmers in Africa. It seems that the “Wall Street needs reform” president was rather pro-business behind the gates.

Another such lobbyist with close ties to the White House was former New York congressman Tom Downey, who at the time was married to Carol Browner. Until 2010, she was Obama’s energy czar. Downey was the head of Downey McGrath Group, a lobbying firm whose clients include Time Warner Cable and Herbalife, which sells nutrition and dieting products. As of January 2012, he had been to the White House complex for meetings and events 31 times. On Dec. 10, 2010, Downey held a meeting with economic adviser Lawrence H. Summers and just happened to bring along Bill Cheney, the head of the Credit Union National Association and one of Downey McGrath’s clients. John Magill, the top lobbyist for the association, said that the group was pushing to lift the cap on the percentage of assets its members can lend out.[3]

“A lot of folks,” Obama said in April 2012, “see the amounts of money that are being spent and the special interests that dominate and the lobbyists that always have access, and they say to themselves, maybe I don’t count.”[3] That is also the inevitable reaction from the White House visitor log. Even members of Congress may conclude that they don't count.

According to U.S. Sen. Ron Wyden (D-Oregon), for example, the U.S. Trade Representative was sharing draft negotiation documents on the Trans-Pacific trade deal with the governments of other countries and American corporate executives who serve on advisory boards, no such access was being provided to the majority of Congress or most nonprofit groups. "The majority of Congress is being kept in the dark as to the substance of the TPP negotiations, while representatives of U.S. corporations--like Halliburton, Chevron, PhRMA, Comcast and the Motion Picture Association of America--are being consulted and made privy to details of the agreement," Wyden said[4]. A subsidiarity of Halliburton had been accused by the U.S. military of charging it $1.6 billion for fake services. The Motion Picture Association had former U.S. Senator Chris Dodd (D-Conn.) as its head. 

Furthermore, ABC News had reported in 2011 that employees of Comcast had "contributed more money to President Obama's reelection bid than employees from any other organization, according to [an] analysis of the Federal Election Commission data by the Center for Responsive Politics."[5]  It appears that the Obama administration was being quite responsive to Comcast in enabling the company to "buy" the access to the trade negotiations. In fact, Obama attended "an intimate fundraiser at the home of Comcast executive vice president David Cohen in Philadelphia in June [2011] and a private 'social reception' at the Martha's Vineyard estate of Comcast CEO Brian Roberts [in August 2011]. Cohen put together more than $500,000 in contributions to the Obama campaign and the DNC for the 2012 election. Nonetheless, the president’s press secretary—speaking as if tone-deaf—said, “Our goal has been to reduce the influence of special interests in Washington — which we’ve done more than any Administration in history.”[6] 

It seems to me that the Obama administration's mutual back-scratching with big business can explain why Obama caved on the "public option" in his health-insurance reform law--essentially handing the existing private insurance companies tens of millions of new customers financed by the U.S. Government without any competition from a public insurer. The close ties can also explain why Obama backed off from his statements that Wall Street banks too big to fail should be broken up preemptively (rather than merely having the government get involved to help out on the liquidation after a bank has gone bankrupt as is the case in the resulting law). Even though the positive correlation of campaign contributions and favorable access and legislation (and trade negotiations) does not in itself prove the existence of a quid pro quo, the fingerprints are all over the darkened windows of Obama's White House. Rather than attacking capitalism, Obama was wallowing in it even as he occasionally threw red meat to his anti-corporate base to get it out to the polls. 

Moreover, both the matter of White House access and access to trade deal negotiation point to the partisan nature of the office of the U.S. Presidency. With regard to the White House access, the Post reports that “Republican lobbyists coming to visit are rare, while Democratic lobbyists are common, whether they are representing corporate clients or liberal causes.” This suggests that the presidency itself may be more partisan than is consistent with representing the United States itself (i.e., the figure-head role of the office).

In general terms, it would be naïve to suppose that powerful figures in Washington, D.C. could somehow be immune from lobbyists when the clients have so much money (i.e., economic power). In other words, concentrated wealth must needs eventuate in pressure on public policy. To restrict lobbyist access at the White House would thus only plug a hole that is a symptom. While doing so might assuage our frustration at such blatant favoritism bought with campaign (or SuperPac) donations, it is that money and the related mammoth size and power of modern corporations that must ultimately be challenged for there to be any change in substance. However, we should not be so naïve as to expect that barring lobbyists from the People’s House or even outlawing corporate political campaign contributions would reduce the influence. Where there are deep pockets of concentrated private wealth, the public weale must needs be so oriented. 

1. T. W. Farnam, “White House Visitor Logs Provide Window into Lobbying Industry, The Washington Post, May 21, 2012.

2. Ibid.

3. Ibid.

4. Zach Carter, "Trans-Pacific Partnership: Key Senate Democrat Joins Bipartisan Trade Revolt Against Obama," The Huffington Post, May 23, 2012.

5. Devin Dwyer, "Comcast Employees Top Donors to Obama Campaign Accounts," ABC News, August 25, 2011.
6. Ibid.

Unions and States at a G-8 Meeting

At the G-8 summit at Camp David in May 2012, E.U. and U.S. leaders met with the leaders of four E.U. states (Italy, Germany, France and Britain). As this picture illustrates, the qualitative differences between looking after a union of states and a state can show up unintentionally in informal seating arrangements. In the context of the European debt crisis—in particular, whether to give one state (i.e., Greece) stimulus cash or just insist on the austerity programs already agreed to—the governors of the E.U. states have particular agendas (given the financial interests of the respective states) whereas the federal officials are oriented to the good of the whole (i.e., the E.U.). President Obama of the U.S. was by the time of the summit used to taking such a perspective over and above the interests of particular U.S. states. Such a commonality of federal, empire-level interests as distinct from the relatively particularized interests of E.U. (and U.S.) states could be reflected in the seating arrangement in the picture taken by the White House, wherein Obama, Barroso (sitting next to Obama), and Van Rompuy (in the sweater) seem to be facing the four governors. The seating arrangement could just as easily have been a circle. It probably was, originally, and I suspect that the federal v. states distinction operated unconsciously on the participants such that the three federal officials came to be as though a line facing the four governors of E.U. states.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

The United States as Religious and Secular Societies

E pluribus unum, or “Out of many, one,” is a motto for the United States—the American States that are united. The many can refer, I suppose, to the sheer number of inhabitants stretching across a continent and beyond. The word could also refer to the diversity of people living even in a large American city. Finally, the word could refer to the Union consists of many different socio-political societies, or republics—again possibly referring to the number of states or the fact that they differ so from one another.  It is the last interpretation that I want to explore here, for it alone gets at the fact that the U.S., like the E.U. and China, are at the empire-level (or scale) in twentieth-century (rather than medieval) terms (i.e., scaling).

Yellow: most "religious."  Blue: least "religious" (as per regular attendance). Notice the "river" of yellow running through the (political) "red states" in the middle of the map. Even so, "yellow" is doubtless not homogenous.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

A Conflict-of-Interest in Lobbying: The Case of JPMorgan

At the JP Morgan stockholder meeting on May 15, 2012, as the FBI was opening an investigation into the bank’s $2 (or $3 )billion loss on credit derivatives, Chair/CEO Jamie Dimon gave what the Huffington Post calls “a spirited defense of the bank’s efforts to lobby against stiffer financial regulation.” He argued that the bank’s interest is the same as the stockholders—namely, to make the financial system strong and sound. What he omitted was the part about the bank’s interest including its own profit, even if systemic risk of the system is increased as a result. In general, any business looks primary after its own interests, and only then to the general interests of the system.

The full essay is at "JPMorgan: An Unethical Monstrosity," available at Amazon. 

California Fiscal Policy: The Crowding-Out Effect

In the U.S. Constitutional Convention of 1787, some delegates expressed the concern that giving the General (federal) Government the authority to tax income would eventually result in a “crowding out” of the ability of state governments to raise revenue. Over two hundred years later, in 2012, California had cut its budget by 20 percent over the previous three years and was still faced with a $16 billion deficit.[1] Unlike Greece, California cannot avail itself of bailout funds from the federal level. Additionally, the Federal Reserve, like the European Central Bank, is barred by statute from bailing out a state government. Even as the U.S. Government places certain requirements on California’s budget that make it more difficult for the Government of California to make cuts, it could not avail itself of the bailout (TARP) that had benefitted Wall Street banks and the Michigan auto industry.

The complete essay is at Essays on Two Federal Empires, available at Amazon.

1. “California Governor Calls for Higher Taxes, 4-day State Workweek to Fill $16 Billion Gap,” NBC News, May 14, 2012. 

Tsipras against Austerity: Merkel Bends on Stimulus

Under pressure to join a unity government in Greece with the New Democracy and Socialist parties, Tsipras of a “radical left” Syriza party was holding firm as of May 13, 2012. Even as the resulting prospect of new elections and a possible reneging on the agreement by Greece, there is something to admire in Tsipras’ position.

Greek president Karolos Papoulias meeting with leaders of the three main parties (Tsipras on right) AP

The full essay is in Essays on the E.U. Political Economy, available in print and as an ebook at Amazon.

Anti-Austerity in Greek Government

The Socialists and then the New Democracy Party told Greeks that sacrifices were necessary to avert default on the state’s debt. This position came at a high political cost on May 6, 2012, when both parties lost seats in the state’s legislative election. “The established parties collapsed — they had too much pressure from Berlin and Brussels and the I.M.F.,” said Nikos Xydakis, an newspaper editor and a political commentator, referring to Greece’s foreign lenders.[1] In other words, the leaders of the two mainstream Greek parties sold out their compatriots, having caved in to ultimatums from Merkel operating at the E.U. level. “In a meeting with President Karolos Papoulias, the leader of the leftist party, Alexis Tsipras, ridiculed the leaders of the two main parties whose coalition lost its majority in the parliamentary elections.”[2] Tsipras added that his party would not be forming a government with either party. The New Democracy Party had been unable to form a government in the wake of the election, so it was then Tsipras’ turn to try.

Alexis Tsipras  and Greek President Papoulias   NYT/Kostas Tsironis

The full essay is in Essays on the E.U. Political Economy, available in print and as an ebook at Amazon.

1.. Rachel Donadio and Niki Kitsantonis, “Greek Leftists Rule Out Coalition with Incumbents,” The New York Times, May 8, 2012.
2. Ibid.

Fuld’s Arrogance at Lehman: Systemic Risk

Documents released in May 2012 regarding Dick Fuld at Lehman Brothers prove that he was aware of the high risk involved in holding so much real estate (and related security derivatives). This means definitively that “the ‘forces-out-of- our-control’ argument we hear from Wall Street leaders is [self-serving] bunk. It is the ill-advised behavior of one banker after another, day in and day out, that leads to the sort of devastating financial crisis we are only now emerging from.”[1]

The full essay is in Essays on the Financial Crisis, available in print and as an ebook at Amazon.

1. William Cohan, “Lehman Docs Show Wall Street Arrogance Led to Financial Collapse,” The Huffington Post, May 7, 2012.

Merkel’s Fiscal Box in the E.U. Debt Crisis

Germany was ruling out any substantive shift in its approach to Europe's debt crisis despite a rising chorus of opposition to Berlin's austerity policies that reached a crescendo in the elections in Greece and France on May 6, 2012. On the following day, Merkel “rejected the notion that Europe was on the brink of a major policy shift after Socialist Francois Hollande defeated her fellow conservative Nicolas Sarkozy and Greek voters punished ruling parties who slashed spending to secure a foreign bailout. . . . Merkel herself made clear that, while there was scope to discuss tactics, the overall strategy EU leaders committed to by agreeing a compact on fiscal consolidation was ‘not negotiable.’”[1] That seems a bit presumptuous, considering that the “fiscal pact” had yet to be ratified in enough of the states to go into effect.

The full essay is in Essays on the E.U. Political Economy, available in print and as an ebook at Amazon.

1. Noah Barkin and Stephen Brown, “Germany Austerity Policies: Berlin Unmoved by Votes in France, Germany,” The Huffington Post, May 7, 2012.

Europeans Vote against Austerity in 2012

On May 6, 2012, elections took place in six E.U. states. The most significant in terms of the debt crisis were those of France and Greece. In France, Francois Hollande narrowly beat Nicolas Sarkozy. Sarkozy “is the latest of a string of European incumbents, from both the left and the right, to lose in a larger popular revolt against budget-cutting and tax increased during a time of recession and high unemployment.”[1] Hollande said “he intends to give ‘a new direction to Europe,’ demanding that a European Union [amendment] limiting debt be expanded to include measures to produce economic growth.”[2] After midnight, Hollande spoke against austerity to a crowd gathered at the Bastille. To be sure, an anti-Sarkozy-arrogance vote doubtlessly benefitted Hollande. This makes it difficult to treat this (or any other) election as a mandate policywise. Even so, the center of gravity on austerity at the E.U. level had shifted, given the important role of state officials there.

                 François Hollande addressed supporters in Tulle, France.      Philippe Desmazes/Agence France-Presse

Meanwhile, voters in Greece were shifting the political landscape in that state, “bolstering the far left and neo-Nazi right in a wave of protest against the dominant political parties that they blame for the country’s economic collapse.”[3] In other words, the two main parties that had agreed to the austerity/bailout agreement lost ground to other parties—essentially splintering the vote. An exit poll “indicated that center-right New Democracy party was in first place with 19 to 20.5 percent of the vote, much less than the 34 percent it won in 2009. But in a major shift, the Socialists, who dominated for decades, won 44 percent of the vote in 2009 and were in power when Greece asked for foreign aid in 2010, appeared to have 13 to 14 percent of the vote, putting them behind the Coalition of the Radical Left, called Syriza, which opposes Greece’s agreement with its foreign lenders. Syriza appeared to be drawing 15.5 to 17 percent of the vote.”[4] New Democracy and the Socialist Party had agreed to the austerity, and they paid a price at the polls.

The shifts in both states undoubtedly provided federal officials (including state officials active at the federal level) with a message: more and more E.U. citizens were opposing the austerity-only approach. Lest it be concluded that Hollande and the Greek legislature trigger a change of E.U. policy, incumbents including Angela Merkel were still a force to be reckoned with. Generally speaking, actual political change occurs in graduate steps rather than all at once after an election. The status quo is never entirely defeated by a few replacements; it takes several elections for a sea-change to gain the upper hand in governmental channels.

Even so, May 6, 2012 suggests that the forces of such change were gaining.  Even if it would take more elections for the austerity-emphasis to be changed, it was already clear that a majority of the people were willing to vote as if they were opposed to the approach.  In relying so much on austerity in their agreement with Greece, state leaders making policy at the E.U. level had gone beyond the center of gravity. In a representative democracy, doing what is right or in the people’s best interest at the expense of popular anger or disapproval has value. However, this leash does not extend very long and it must be tailored to the amount of time until the next election. This is both a disadvantage and advantage of representative democracy: officials cannot get too far from their basis in the popular center of gravity, even if a crisis warrants a long-term solution that is generally unpopular at the grass-roots level.

1. Steve Erlanger and Nicola Clark, “Hollande Ousts Sarkozy in French Presidential Election,” The New York Times, May 6, 2012. 
2. Ibid.
3. Rachel Donadio and Nici Kitsantonis, “Greek Voters Punish 2 Main Parties for Economic Collapse,” The New York Times, May 6, 2012. 
4. Ibid.

Subsidiarity: Federalism Over Catholic Social Ethics?

In the E.U., the principle of subsidiarity functions in theory like the Tenth Amendment does in the U.S.—again in theory. In both cases, public authority on a given domain or policy-area is preferentially to be exercised at the state rather than federal level. The principle, while not federalism per se, can be an element of it. Taking subsidiarity to be “really federalism” turns the latter into an alliance—giving the states potentially so much power that the government of the federation or union itself cannot act as a check on the state governments.

The complete essay is at Essays on Two Federal Empires.