Thursday, January 31, 2019

The Ministerial Exception: A Religious Right to Discriminate

In early 2012, the U.S. Supreme Court recognized, for the first time ever, a “ministerial exception” to employment discrimination laws, saying that churches and other religious groups must be free to choose and dismiss their leaders without government interference. In his written opinion, Chief Justice Roberts wrote, “The Establishment Clause [of the First Amendment to the U.S. Constitution] prevents the government from appointing ministers, and the Free Exercise Clause prevents it from interfering with the freedom of religious groups to select their own.” The wrench in the works here concerns the matter of delimiting the exception, given the inflation in what constitutes “ministerial” in terms of tasks.

The full essay is at "The Ministerial Exception."

Can an American Member-State Exit the Union?

A war was fought over it. In early 2013, the White House made it explicit in replying to a petition. Yet still there was a sense among at least some Texans that something was amiss. Following U.S. President Obama’s re-election in 2012, citizens of Texas, Louisiana, Alabama, and five other member-states in the U.S. signed petitions for the White House to allow their respective states to secede from the Union. At the time, few people other than the secessionists themselves took the petitions seriously. Yet the underlying contending principles deserve more serious reflection even if no "exit" is anticipated. Most importantly, the matter concerns how and whether the rights of member-states (and majorities of the people, therein) are to be circumscribed in a federal union that leaves said republics semi-sovereign and with residual sovereignty.
In his reply to the petitions, Jon Carson, director of the White House Office of Public Engagement at the time, argued that the American Founders did not provide a right for states to “walk away” from the Union because it is perpetual. He cited Texas v. White, a U.S. Supreme Court case in 1869 that ruled that individual states do not have a right to secede. The republics constituting the polities within the Union have residual sovereignty yet not the most basic authority, or right, to secede. As a republic is a polity whose political system is that of representative democracy, the right denied would be that of the majority of the people. Hence, Texas v. White can be interpreted as infringing on democratic principles. 
For his part, the communications director for the Texas Nationalist Movement, Jeff Sadighi, pointed to the section of the Texas constitution that asserts Texans have the right “to alter, reform or abolish their government in such a manner as they may think expedient.”[1] To alter or reform the government of Texas refers to the governmental system there presumably by constitutional amendment. Although it is possible that an amendment could allow for a "Texit" from the U.S., typically amendments pertain to a government itself as a political system rather than to relationships with other political entities, even if governmental sovereignty is split. To abolish a standing government is to do just that. Since to avoid a brutish state-of-nature some governance is required, presumably the constitution also gives a right to create a new government. The question here is whether such a government would be bound to the U.S. even if secessionability were part of a new government of Texas.
For an answer, we must locate the term "perpetual union" at the federal level, for the Texas v. White decision relies on the federal insistence that the Union is perpetual--meaning that it cannot be abolished and that member-states cannot secede, or "exit" as per twenty-first century parlance. In 1777, The Articles of Confederation and Perpetual Union were proposed to the 13 sovereign member-states. Ratification concluded in 1781. The treat did not establish a federal government; there was only the Continental Congress wherein delegates from the republics met. Article XIII states that "the Union shall be perpetual." In Texas v. White, the U.S. Supreme Court took this to mean that a member-state could not leave the union. I submit that this inference is fallacious. For the Union itself to be perpetual does not require that no member-state leave the Union; it would not be abolished were a state to "exit." Even had the member-states in the Confederate States of America had succeeded in exiting in the 1860s, the U.S.A. could have continued to exist, minus those states. In short, perpetual does not imply that something remains as it is; rather, perpetual means that the thing itself cannot be abolished.
The most blatant error in Texas v. White is that the Court assumed that The Articles of Confederation were still valid. In 1789, that treaty was replaced by the U.S. Constitution, and no reference to perpetual is in that ongoing document
In contrast, the argument against the Texas v. White decision rests on constitutional language. In particular, the 10th Amendment explicitly refers to the residual (i.e., unspecified, and thus unlimited) powers being held by the states and the people, rather than to the federal government, which includes the U.S. Supreme Court, the Congress, and the U.S .President. The "people" refers both to roles as citizens of the respective states and U.S. citizens. The former implies that the majority of a state's electorate have just as much residual sovereignty as does a majority of the U.S. electorate; the notion of popular sovereignty as the ground of a representative democracy gives a majority foundational authority. So it makes sense that residual sovereignty ultimately belongs to majorities of electorates. In federalism, each citizen is one of two polities--her member-state and her federal government. That the amendment assigns residual sovereignty to the states along with the people implies that the latter have residual sovereignty especially in so far as a person is a citizen of a state. Moreover, the residual sovereignty of a member-state and the people more than outweigh the limited, or enumerated, authority of the U.S. Government, and especially the historical treaty that since 1789 has not been in effect.
The U.S. Supreme Court, a branch of the federal government, reached its Texas v. White decision in spite of the fact that it is so obviously without an ongoing constitutional basis; the Court went instead merely on the stretched assumption that what had been stated in the Articles is somehow to be implied in the U.S. Constitution, which replaced the Articles. The explanation may lie in the Court being caught in an institutional conflict of interest. In short, the head of a branch (or arm, as per The New York Times' terminology on the E.U., which in turn seeks to distinguish itself from the U.S. in part by having arms rather than branches) has an institutional interest in protecting the government or level of government that has the branch or arm over being a level (i.e., unbiased, and thus fair) adjudicator of constitutional conflicts between a member-state (or even the member-states) and the government in which the Court is a part. Americans, and even the world, miss this conflict of interest whose support is in the U.S. Constitution.
It may be that the E.U.'s constitutional language allowing states to secede reflects a more balanced federal system with respect to the states and the Union. In fact, the E.U.'s Supreme Court, the ECJ, has cleverly evaded the conflict of interest that plagues its counterpart in the U.S. by having a given state nominate a state jurist to be confirmed by all of the states. With such a state-based process, the inherent bias of the European Court of Justice toward the E.U. level is institutionally (here, in terms of process) countered such that the state and federal levels have weight. That the U.S. has not learned this point from looking at the ECJ is troubling, as this implies that the U.S. Constitution may not be flexible enough even to be improved.

For more on such conflicts of interest, see Institutional Conflicts of Interest, available at Amazon. For more comparisons of the E.U. and U.S., see Essays on Two Federal Empires, also available at Amazon.

1. Manny Fernandez, “White House Rejects Petitions to Secede, but Texans Fight On,” The New York Times, January 16, 2013.

Sunday, January 27, 2019

Is God the Invisible Hand?

A Baylor University survey on religion and economics in 2011 revealed something that may be distinctly American, culturally speaking. The results indicated that about “one in five Americans combine a view of God as actively engaged in daily workings of the world with an economic conservative view that opposes government regulation and [advocates] the free market as a matter of faith.”[1] Specifically, those Americans believed that the “invisible hand” of a competitive market is actually God at work. Put another way, the assumption is that the economy “works” because God wills it to by intervening directly in the market mechanism itself. Government regulation, in diverting economic supply and demand from “the invisible hand,” is thus sinful. Regulating the economy challenges God’s omnipotence (i.e., power) by interfering with God’s intervention in our daily lives via the operation of the market mechanism. 

The full essay is at "Is God for Regulation?"

1. Cathy Lynn Grossman, “Religion Colors Money Views,” USA Today, September 20, 2011. 

Secession E.U.-Style: Beyond the Economic Implications

Financial markets place bets on political outcomes, such as how or even whether the E.U. state of Britain would secede from the Union. Leading up to the March, 29, 2019 secession date, the shifting odds moved stock, bond and foreign exchange markets, especially given the instability in the state government in general and more particularly on reaching a deal with the federal government in Brussels on just how the state would secede. Of course, the political magnitude of a state seceding from a Union such as the E.U. or U.S. is not captured by how markets anticipate the risks. To reduce secession to the end of a trade treaty does the secession and the Union itself a grave injustice. More generally, political changes do not reduce to their economic anticipations or effects. Nor is it wise to assess the political viability of future political events by the economic assessments in financial markets.
On January 16, 2019, for example, Capital Economics, a research group in London, placed a 70% probability that Britain would find a way to “fudge and delay” its secession past the deadline, as per the E.U., Article 50, of March 29, 2019.[1] To investors, the implications that the British pound would probably rise and the stocks would likely surge are of value. This does not capture, however, the political downside of a government dealing with such an important matter by “fudge and delay.” In other words, what such a way of handling something as important as seceding from a union in which the states are semi-sovereign means in terms of governance is not captured by the 70% projected likelihood.
March 29, 2019 remained “a meaningful deadline” even as British “lawmakers were unable to agree on a course of action.”[2] This reflects terribly not just on that government, but democracy itself. The establishment of an ordered means by which a state could secede from the E.U. represents a significant advance over the U.S., which has left states with one option—secession by force. Yet the British government mishandled the matter of seceding from the E.U. after the state invoked the secession process at the federal level. This undermined the E.U.’s prudent advance over the U.S. in introducing a flexible constitutional (or "basic law") way for states to secede without the need to resort to force.
The probability of somewhere below 20% but above zero that the secession would occur without any negotiated agreement represents a more dire economic prospect. In November, 2018, the Bank of England projected “a major shock that could subtract more than 10 percent from Britain’s gross domestic product” from this low-probability outcome.[3] Yet even such a remarkable economic effect on the state would not capture the severity of the political failure. Secession from a union is not just ending a trade treaty; much more than the economic aspect is involved. At the very least, the failure of the negotiations between the state and federal government would point to a major weakness in the E.U.’s Article 50, and thus to a political need to alter it. In short, secession should not depend on the vagaries of negotiation. After all, it had broken down between U.S. President Lincoln and the state of South Carolina in 1861. 
Another possible scenario facing Britain before the March deadline was that the state would not secede after all. "Goldman placed a 40 percent probability on the chance that Britain, in the end, would not leave the European Union at all, which would be accomplished through another referendum repudiating the original vote."[4] Because the original referendum had been billed as the decision point on the question, to go back on that decision just because it was difficult for the British government to implement betrays democracy itself, for the people had spoken with the understanding that it would be final. To say, "Oh, actually it wasn't" would be bad form. That the people had spoken, each side playing by the same rule (i.e., the question would be settled by that referendum), is something that government officials and legislators should--from a democratic standpoint--have fully respected from the day of the referendum. That the losing side on the question would set up another referendum would undermine democracy because even those decisions billed as determinative could not be taken as such. Goldman's 40% probability can thus be read as saying something about democracy in Britain and democracy itself, and we can't get this merely from the way the announcement of the 40% probability affected financial markets and individual investors. 

See Essays on the E.U. Political Economy and Two Federal Empires, both available at Amazon.

1. Jeff Sommer, “Governments Malfunction and the Markets Place Their Bets,” The New York Times, January 25, 2019.
2. Ibid.
3. Ibid.
4. Ibid.

Saturday, January 26, 2019

The 2012 U.S. Presidential Election: Fueled by Leadership or Money?

The 2012 U.S. presidential election was the first in which neither of the major-party candidates participated in the campaign-matching system that imposes campaign spending limits in return for federal financing. It was also the first presidential election since the Citizens United case in 2010. That U.S. Supreme Court ruling was a significant factor in the election because corporations and unions could dip into their respective treasuries directly, rather than only through employee or member contributions, spend an unlimited amount on political ads by making donations to “social welfare” organizations. Without disclosing their donor lists, these non-profit organizations could create political ads that in turn could favor or criticize a particular candidate, albeit with no formal approval from the favored candidate. Faced with formidable super PACs pumping some $800 million or more in favor of Mitt Romney, Obama’s money-machine went into high-gear in a sort of “rich man’s” arms-race. Some rich donors had spent millions of dollars to push the massive ship of state a discernible distance in their direction. Hardly anyone expected that the contending high monies would virtually cancel each other out. Hardly anyone thought the Obama campaign’s scientifically-based “ground game” oriented to getting new voters registered would trump Romney’s financial advantage. To be sure, Wall Street was also behind Obama; Goldman Sachs had donated $1 million in 2008, and Obama in turn gave the big banks federal money (TARP) without strings, including on bonuses (which the bankers abused).
Subtly missing in the 2012 presidential election season among all the financial fire-power and Obama’s grass-roots operation and even all the presidential “debates” were ideas and a sustained societal discussion of a few basic principles of political economy and governance. The result, in spite of all the money, time and effort, was a continuance of the political status-quo because few minds were changed in the process. If ideas and rational argument are not absolutely required for a basic shift in a body politic worth the name vision, at least they provide for a basis for leadership and real change.  
Unfortunately, The New York Times reported afterwards that “the overall cost of the campaign rose accordingly, with all candidates for federal office, their parties and their supportive ‘super PACs’ spending more than $6 billion combined.” The grand result for all that money was that the U.S. House remained in Republican hands, the U.S. Senate continued with a slim Democratic majority, and the Democrats held the White House. Even the deal-makers—the major players—notably John Boehner, Nancy Pelosi, Harry Reid, Mitch McConnell, and Barak Obama—remained in place. The difficulty they had had as a group in coming to agreement on major policy items before the election was essentially unchanged.
On Thursday, November 8tth The New York Times summed up the previous year and a half as follows: “After $6 billion, two dozen presidential primary election days, a pair of national conventions, four general election debates, hundreds of Congressional contests and more television advertisements than anyone would ever want to watch, the two major political parties in America essentially fought to a standstill. When all the shouting was done, the American people on Tuesday more or less ratified the status quo that existed at the start of the day: they returned President Obama to the White House for another four years, reaffirmed Republican control of the House and kept the Senate in Democratic hands. As of Wednesday, the margins in the House and the Senate had each changed by just two or three seats.” For all the money, time and effort spent kicking up dirt and picking fights, when the dust settled it was clear that the American electorate had not moved much at all.
It is not that the American electorate intentionally voted for continued divided government or gridlock. Rather, the American body politic contained voters of diametrically-opposed political, economic and social ideologies. In spite of the length of the campaign “season,” neither camp had budged by election-day. The resulting continuance of the status quo meant the continuance of the political constellation in Washington that had led to gridlock. Besides gridlock being more generally etched into the very design of the federal lawmaking apparatus in part to check power as well as unwelcome encroachments of the General Government on to the turf of the state governments, the various stalemates on the Hill in 2011 and 2012 were a manifestation, or symptom, of where the People as an aggregate stood then politically—that is, divided and even polarized ideologically. As a result of the stark ideological differences between citizens and the multiple points of access available in the U.S. Government, both major parties had sufficient electoral support and accessibility to the federal law-making machinery to grind policy-making and legislative activity to a halt on major problems desperately in need of solutions.
A story in The New York Times on the day after the election had as a headline, “Electorate Reverts to a Familiar Divide as Obama’s Support Narrows.” He “garnered just 50 percent of the popular vote, three percentage points lower than in 2008, in a sign of just how divided” the electorate was “over his leadership.” In spite of Obama having lost some of his base, the mere two-percentage-point difference in the popular vote between the two major candidates meant that among the electorate neither “side” had budged much. To find a “verdict” on the president’s first term beyond the vested opinions of the two bases, one must look to how the independents. Even there, the “verdict” was muted.
Referring to the independents, the New York Times reported that the vote was “very close.” In some swing states, including Ohio and Virginia, Romney received a slight majority of such voters (53 and 54 percent, respectively), while Obama received similar majorities in a few others (Iowa and New Hampshire). However, Obama received 45 percent of the independents over all (Romney got 50 percent), and in 2008 Obama had received 52 percent. This means that Obama lost some of the independents he had had in 2008. As a “verdict” of the relatively neutral “jury” segment within the electorate, the loss of 8 percent suggests something less than a vindication for the president.
Moreover, that Obama received 50% of the popular vote over all while Romney got 48% suggests that the contest ended unchanged as a virtual draw. Put another way, only about 3 million Americans out of 310 million residents in the U.S. separated the two candidates in the popular vote. About 1% of the entire population hardly constitutes a mandate, as if “the American people” has swung around en mass to support the incumbent after a long and hard-fought campaign.
To be sure, some general movement can be discerned, as most counties had shifted in the Democratic direction in 2008 to vote for Obama only to shift back in a Republican direction in 2012. It could be said that the country had returned to its native center-right position. That Obama’s narrower base came out in sufficient force to counter the general shift in a Republican direction in most counties and a slight shift away by some independents accounts for his slight majority in the popular vote (and his wins in almost all of the swing states). Even so, such wan movement does not constitute the sort that is associated with an idea or mandate. Put another way, even the shift toward “Obamania” of 2008 was short-lived—the ideational shortfall rendering the “movement” as akin to a short-lived energy spirt from cotton-candy rather than new muscle from rich protein.
Accordingly, “(t)he bottom-line scorecard [from the 2012 federal election] left Washington as divided as ever,” according to the Times, “with no resolution of most of the fundamental issues at stake. The profound debate that has raged over the size and role of government, the balance between stimulus spending and austerity and the proper level of taxation has not been settled in the least.” The ideas had not changed because the hyperactive campaigns had been relatively bereft of new ones or even serious discussion of the central principles.
For all of the money, ads, and “debates,” one might say that talking points rather than novel arguments or ideas took center-stage during the long campaign “season.” In an interview on CBS’s Sixty Minutes broadcast shortly before the election, David McCullough, who had written several books on American political history (and who spoke at my doctoral graduation ceremony!), said he doubted that any words from the two major presidential candidates would stand the test of time. In fact, nothing said or written during even the “debates” was worthy of being retained past the news cycle of the day. The historian went on to contrast the contemporary talking-points with the authenticity in Truman’s “Give ‘em hell Harry!” campaign of 1942. In 2012, talking points backed up by fund-raising and the application of empirical political science to getting elected punctuated the candidates’ trajectories along paths of political-least resistance.
Considering the sheer duration of the primaries and general campaign, the opportunity-cost of shallow campaigning is in terms of foregone governance not only during the duration, but afterward as well. Moreover, the empty-form of a superficial campaign-mode exacerbates the fundamental flaw in having extended the campaign “season” further and further:  Taking a means—that of selecting office-holders to govern—as more important than its end, governance. The eclipse of governance at the federal level in the U.S. is from not only gridlock, but also the enabling ideational emptiness of the modern campaign elongated into a sustained void of sorts that the electorate allowed to take on a life of its own. 
For the body politic to shift as a body having a will from the status quo such that political leadership evincing a direction could replace gridlock and stasis, some ideational-ideological change would have to have occurred in enough voters that the contours of the body itself will have changed. Sadly, the experience of having gone through the financial crisis of 2008—rather than any new idea or exchange of ideas—led an unusually high 51% of the presidential voters in 2008 to favor more government intervention in the economy while only 43% wanted more things to be left to business. The unusually high percentage was a result of economic fear and perhaps even greater hardship due to the crisis, rather than from a national debate centered on a reconsideration of old ideas.
That even powerful people can reflect on the level of fundamental ideas and come to different conclusions genuinely rather than in a political calculation (e.g., Obama’s “change” on gay marriage during his re-election campaign) suggests that citizens too can allow themselves to be more open ideologically and thus shift. An empirical crisis, for instance, can jar loose even fundamental paradigms. For example, Alan Greenspan, a former chairman of the Federal Reserve, admitted in Congressional testimony after the financial crisis of 2008 that the freezing-up of the commercial paper market in September 2008 had shown him that his free-market, or laissez-faire economic paradigm had a fundamental flaw. He marveled before a panel of lawmakers that forty years of observing markets had done nothing to point to the flaw. Specifically, the market mechanism itself can freeze-up rather than make pricing adjustments under conditions of high volatility involving high uncertainty and risk. In September 2008 as banks lost trust in each other, they stopped lending rather than adjust their rates of interest upward to compensate for the additional risk. High risk, especially if occurring all of a sudden, can paralyze a market’s mechanism. Hence, the former central banker could suddenly discern a rationale for regulation by the government because of the “fatal flaw” in the “market-alone” paradigm.
Had the ideas behind Greenspan’s paradigmatic shift percolated through the electorate during the presidential election of 2008 or even 2010 in place of “Obama as the flavor of the month,” the percentages on the question would not have subsequently flipped back in 2012 back to “center-right” on the question of the role of government in regulating business. Rather, a fundamental shift similar to that which ushered in the New Deal in the 1930s would have been realized. That Greenspan’s “ideational moment” had not registered in the campaigns or the electorate itself at least by 2012 can be seen from the fact that Romney called for financial deregulation even though the lack of regulation of mortgage-based securities had played a significant role in the financial crisis. Absent a sustained paradigmatic reflection from a shared experience of the financial crisis, the electorate was vulnerable to the financial-political power of Wall Street as it continued as though legitimately along its familiar trajectory of profit and self-interest. It is significant that even though Obama came out slightly ahead in 2012, the electorate as a body evinced a shift back to its pre-2008 center-right position on government intervention in business.
Absent new ideas and a sustained reflection on the continued viability of extant paradigms, an electorate succumbs to the status quo. More money—much more money—and more time—much more time—does not necessarily mean that an election-cycle makes a dent in the judgment of the popular sovereign—the We the People—come election day. An election-campaign season should be a rather brief yet poignant opportunity for a genuine societal reflection that results in the body politic being in a new place—that is, changed in some way that will reflect on the ensuing governance. I contend that the way Americans elect the president of the Union was by 2012 not only flawed, but also rather ineffectual and even impotent. It is as though a runner were running in circles only to end up panting where he had begun. To use another analogy, it is as though the voters woke up the day after election day still hungry in spite of having eaten so much cotton-candy. The sacrifice of governance alone, not to mention the value in the popular sovereign (the We the People) making its judgment on general policy and candidates, suggests that elections should include new ideas and substantive arguments rather than each side hammering in more of the same through an eternally-repeated stump-speech and “debate” talking-points.
If there is one thing we can discern concerning the voters almost without exception on the morning after voting, according to the Times, “they were glad that the strident and polarizing contest between President Obama and Mitt Romney was ending.” Beyond the proliferation of negative ads, especially in the “swing states,” and the sheer length of the primary and general campaigns, the voter-frustration may reflect a still-unsatisfied hunger for ideas and authentic, substantive discussion of them and the paradigms we construct out of them and what can be termed, ideational values. I suspect that the want of ideas and genuine discourse had existed for so long that few if any Americans realized what was at the core of their discontent regarding the election cycle. The root may go far deeper than Citizens United and even the serial elongation of campaigning at the expense of governance. It may be asked whether a starving man will eat if he does not realize he is starving.


Jackie Calmes and Megan Thee-Brenan, “Electorate Reverts to a Familiar Partisan Divide,” The New York Times, November 7, 2012.

Susan Saulny, “The Most Sought-After Voters Were No Longer Flattered by the Attention,” The New York Times, November 7, 2012.

Jeff Zeleny and Jim Rutenberg, “Focus Is On Economy As Voters Choose,” The New York Times, November 7, 2012.

Michael Shear, “As Electorate Changes, Fresh Worry for G.O.P.” The New York Times, November 8, 2012.

Peter Baker, “Obama Wins a Clear Victory, but Balance of Power Is Unchanged in Washington,” The New York Times, November 8, 2012.

Sara Murray and Patrick O’Connor, “How The Race Slipped Away From Romney,” The Wall Street Journal, November 8, 2012.

Citizens United: A U.S. Supreme Court Ruling Ensconced in the Status Quo?

According to Rodell Molineau, executive director of the Democratic super PAC American Bridge in 2012, "The meta-lesson from [the 2012] election cycle is that showing up and participating in the process is key, which is something that we didn't do in 2010. I think a lot of Democrats ceded the field on super PACs because most people in progressive circles didn't believe in the Citizens United ruling."[1] The U.S. Supreme Court’s Citizen’s United ruling on January 21, 2010 opened up unlimited corporate and union spending on political campaigns. The fact is, sometimes you have to play by rules you don’t agree with in order to compete. The obvious danger is that one gets coopted by those rules in the process, even having a financial disincentive to push for a repeal of the problematic ruling. In other words, the ruling accrues the benefit of being the status quo and thus becomes extremely difficult to dislodge.
In 2010, the Huffington Post reported, “conservative outside groups held a three-to-one advantage in spending on House races and a slightly more than two-to-one advantage in Senate races, according to the Center for Responsive Politics. The formation of the Democratic super PACs and their coordination with traditional liberal groups—labor, environmental and women's groups—helped cut that advantage to less than two-to-one in both House and Senate races in 2012, according to Federal Election Commission data. . . . In the end, conservative groups reported spending $102 million on House races, compared with $79 million for Democratic groups. In Senate races, conservatives spent $135 million, compared with $89 million for Democrats.”[2] However, former U.S. senator Russ Feingold, co-author of the 2003 campaign finance reform act, said, “I don’t think we won because of this thing.”[3] This remark is crucial, should it be necessary to ween Democratic Congressional leaders off an addiction to the saccarine superPAC money.
One other major factor Feingold could have been referring to was the impact on Congressional races of the Obama campaign’s ground-game and related systematic data-collection efforts in 2012. Specifically, the campaign was able to identify new voters, track their opinions, and get them out to vote. Congressional campaigns and even groups such as MoveOn were able to tap into that resource in getting out the vote too. Getting out the base made all the difference in the 2012 election, particularly as most counties in most states shifted back in a Republican direction after having tilted blue for Obama in 2008.
We should also consider the mistakes that Congressional candidates themselves made, such as Richard Mourdock, the Republican candidate in Indiana for the U.S. Senate seat formerly held by Dick Lugar. Mourdock claimed that a rape victim getting pregnant is “God’s will.” It is questionable whether any amount of superPAC money could undo such a gaffe.  A similar though less outlandish case involved Mitt Romney’s comment made in private to a group of rich potential donors that it would not be his job as president to worry about the 47 percent of Americans who did not pay income taxes (but paid other taxes) in 2011. I wonder whether voters are capable of ignoring the plethera of superPac-funded political ads in such cases and voting instead on the basis of what they have reason to believe more accurately depicts the candidate’s judgment and opinions (i.e., via the gaffes). One would like to think that voters could see through the slickly marketed political ads on television in every case, but having the ad edge can indeed help even a pathetic candidate, particularly in reducing the opponent’s support.
Sadly, having a lot of money counts a lot in Congressional elections. In the constitutional convention in 1787, some delegates worried that Congress, unlike the state legislatures, would be an aristocratic body—even the U.S. House, which was to be the repository of democracy in the new federal government. By the twenty-first century, the populations of the states had become much more than they were in 1787, including relative to the number of members of Congress. The U.S. as a whole reached 300 million around the year 2000, with only 535 members of Congress. The aristocratic element can be seen in these numbers alone. It should be no surprise that candidates for those offices would attract a great amount of money, and with it private influence over public policy. Even were Citizens United upended by a future decision or an amendment to the U.S. Constitution, it would be difficult to hold back the flood of money attracted to all the power that Congress has amassed since the Great Depression in the 1930’s. In other words, the sound of money is simply a reverberation of the nature of power in an increasingly consolidated political empire.

1. Paul Blumenthal, “Democratic Super PACs Trim Conservative Advantage in Congressional Races,” The Huffington Post, November 10, 2012.
2. Ibid.
3. Ibid.

Wednesday, January 23, 2019

Corporate Appointees in the West Wing: A Counter-Productive Way of Holding Business Accountable

Presidents in governments are called to be leaders, which means advocating a vision of change from the status quo. Otherwise, they are merely administrators. So it would be counter-productive for a U.S. president to fill his administration with people financially invested in the status quo. Yet President Obama did just that, in spite of the fact that his rhetoric envisioned radical change in health insurance and still regulations on Wall Street to prevent another financial crisis. In short, he not only let the regulatees in the room, but also gave them important roles with power that would affect their respective industries.
For example, President Obama's chief of staff, William Daley, had been a top executive at JPMorgan Chase, where according to The New York Times, he was paid as much as $5 million a year and supervised the Washington lobbying efforts of the nation’s second-largest bank. Daley also served on the board of directors at Boeing, a large military contractor, and Abbott Laboratories, the global drug company, which had "billions of dollars at stake in the overhaul of the health care system." Although some argued that the White House needed someone on the inside who had the ear of business, the conflict of interest in having someone so tied to vested commercial interests decide on who gets into the Oval Office and determine the President's agenda ought to be troubling. Just one year earlier, a Wall Street reform bill had been passed that sidestepped the question of whether banks too big to fail should be allowed to exist and did nothing to address the fact that executive compensation had been so out of step with performance in the years leading up to the financial crisis. Also, the enacted health-care reform law, Obamacare, included a mandate and excluded a public option as per the interests of the heath insurance lobby. Even the appearance of a conflict of interest like this one is enough to spur us on to investigate it even though Obama's time in office has passed. That there were more blatant conflicts of interests in Obama's choice of appointees should raise even more of a red flag. Was he blind to them (unlikely), or did he intend to stay within the status quo in spite of his rhetoric against health insurance companies and investment banks? Put another way, if he really intended to offer an alternative to private insurance companies and constrain Wall Street firms in the wake of the financial crisis, putting corporate insiders in key offices would be counter-productive. Of course, he may have meant to hold back on his rhetoric, given all the financial inducements that the corporate sector could offer. Obama was much richer leaving office than he was when he entered the White House.
Larry Summers, whom Obama appointed as his chief economic advisor, had been instrumental in the Clinton Administration in keeping derivative securities from being regulated. How could Summers advise on a solution when he was against regulating the financial sector, at least where most needed (CDO's), and had actually played a role in causing the financial crisis? Simply in his choice of Summers, Obama sent a signal that he was a creature of the status quo (and its powerful adherents). 
Timothy Geithner, whom Obama nominated to be Secretary of the Treasury, had been president of the New York Fed, a job that not even Geithner saw as regulating. The big banks had had a formal say in his assuming that role--Citigroup being his sponsor. It is no surprise that he played a major role in AIG paying Goldman Sacks dollar-for-dollar on the CDO swaps even though AIG was essentially on life-support with federal money. So he would be an unlikely pick for a president who wanted systemic change involving the relationship between the federal government and Wall Street. Mark Patterson, Geithner's chief of staff, had been a lobbyist for Goldman Sachs, and Lewis Sachs, a senior advisor at Treasury, had been head of Tricadia, which bet against the CDOs (mortgage-based derivatives) it was selling to clients.
William C. Dodley, President of the New York Federal Reserve after Geithner left to become Treasury Secretary, had praised financial derivatives (including sub-prime-mortgage-based) before the financial crisis and, not coincidentally, had also been the chief economist at Goldman Sachs.
Gary Ginsler, Obama's head of the Commodities Futures Trading Commission, had been an executive at Goldman Sachs. He had helped ban the regulation of financial derivatives, including those based on risky sub-prime mortgages.
Mary Shapero, Obama's head of the Securities and Exchange Commission (SEC) had been CEO of an investment banking self-regulation body. As a MBA student, I volunteered to help a professor with his research on NASD self-regulation. I was attracted by the application of systems theory to the notion of industry self-regulation. In hindsight, I was very naive concerning the propensity of a self-regulatory body to hold to the public good, rather than take the industry's own interest as a starting point and perhaps even devolve to enable a few bad participants with the self-regulatory body serving as a cloak. Even at the industry level, money talks; securitizing especially sub-prime mortgages was very profitable for investment banks through the first seven years of the twenty-first century.
Campaigning on September 29, 2008 in heat of the financial crisis, Obama said, "The era of greed and irresponsibility on Wall Street and in Washington have led us to a financial crisis." That is, "A lack of oversight in Washington and on Wall Street got us into this mess." Even so, as president he signed the Dodd-Frank Financial Reform Act, which in hindsight has been recognized as moderate at best, for it left the conflict of interest at rating agencies, executive compensation, and CPA firms largely entact. Obama resisted adding strings to the TARP federal funds for the big banks, such as restrictions on executive compensation and employee bonuses even though the E.U. enacted new restrictions. Furthermore, as of mid-2010, no financial firm or individuals therein had been prosecuted under Obama for fraud--not even Countrywide. In short, Obama as president fell well short of the "Real Change" mantra of his campaign. As one person observed at the time, Obama put together a Wall Street government. To think that real change could come from such a status-quo of appointees is so incredulous that Obama's very claim of real change could only be taken in hindsight as a false selling-point not unlike the traders at Goldman Sachs who were telling even good clients that the bonds based on sub-prime derivatives were safe even as the traders privately regarded them as "crap." Whether misleading the American people or good clients, the culprit is private advantage over public good via deceit. 
In the case of Obama, I suspect the answer can be found in following the money. Goldman Sachs contributed $1 million to Obama's presidential campaign. Also, he was considerably richer after his two terms in office. I suspect that he had discovered that he could say one thing in public and do another thing in private. It may be that representative democracies are susceptible to becoming invisible plutocracies with a patina of democracy to satisfy the masses while the representatives and the business executives make out quite well working together.

For more on institutional conflicts of interest, see Institutional Conflicts of Interest, available at

 Eric Lipton, “Business Background Defines Chief of Staff,” The New York Times, January 6, 2011.
"Inside Job" (2010), Sony Pictures Classics.

Faster, Higher, Bigger: A Rationale for Regulation

The death of a Georgian luge athlete on the opening day of the 2010 Winter Olympics occurred amid concerns about the speed of the record-setting track at the Whistler Sliding Center. “There were some questions asked by other athletes even before this tragic accident,” said Nikolas Rurua, Georgia’s deputy minister for culture and sports. He added that there had been several crashes in the same area of the track. This is like looking back in a financial crisis to point out that several had preceded that one. It does seem like financial crises may be part of a larger pattern that is based in human nature. I contend that just such an innate propensity to recklessness at the expense of the public good (and one's own!) serves as a rationale for regulation in any country.
The luge is often called the “fastest sport on ice.” Sliders use their legs and shoulders to steer small fiberglass sleds down an icy track, at times approaching or surpassing speeds of 90 m.p.h., according to the Vancouver 2010 Winter Olympics Website. One headline read, “This Winter Games could be the first time the sport sees a competitor hit 100 mph.” Sports Illustrated’s David Epstein, who covered the Olympics, claimed the Whistler course was at the time the fastest in the world, “and not by a little.” He explained that while most luge courses “flatten out” around the 11th turn, the Whistler track “just keeps on dropping, so there’s really kind of no break from gathering speed toward the end.” Epstein reported that some athletes had been complaining about the speed of the course and speculating that the 2010 Winter Games could be the first time a competitor hit 100 mph. “That’s 15 to 20 mph faster than any course in the rest of the world.” Is being faster the overriding point?
Whether we are talking about luge tracks, sky-scrapers, corporations, or passenger jets, the human psyche seems to have an innate proclivity to extend a threshold further—regardless even of how far the extension is from our natural limits. This can be reckless, for we are perhaps by nature inclined to ignore the recklessness involved in going faster or getting bigger.
Not only do we like faster, higher, and bigger; we, like Dick Fuld, the last CEO of Lehman Brothers, are not content until we have hit biggest, for he put the investment bank through so much risk in part so his bank would surpass Goldman Sachs. He wanted to be higher, in the rarified Wall Street club that has included JPMorgan Chase, Citigroup, Solomon Brothers, Bank of America, and Goldman Sachs. If the human susceptibility is as I describe here, a strong rationale for regulation of business exists in any country. We should not limit recklessness to that which occurred from the late 1990's through at least the Financial Crisis of 2008 as large American investment banks bundled sub-prime (i.e., risky) mortgages into bonds, a third of which Moodys rated AAA, and sold even the lower-rated bonds as if even they were safe (while confidentially admitted to themselves that they were "crap"). The human brain simply doesn't function well when in the grip of greed. Interestingly, a group of the large bankers meeting with U.S. Secretary of the Treasury, Henry Paulson, amid the fear in the financial crisis admitted that they had been wracked with greed--so why hadn't the federal government protected them from themselves with financial regulation? The answer is of course the bankers' own lobbying and political campaign contributions. You cannot both corrupt government into functioning as a plutocracy and yet expect that same government to be politically strong enough to act as a constraint on even severe cases of greed.

Airlander 10, the largest aircraft in the world, crashed on its second test-flight on August 24, 2016
In 1912, the Titanic ocean-liner was the largest thing built by human beings. In spite of the risk in being the largest, the ship was presumed to be unsinkable. Speaking about the ships a century later, Helen Kearns, a spokesperson for Siim Kallas, who was the E.U. Transportation Commissioner at the time, said, “There are legitimate questions as these vessels have substantially evolved in recent years.” I wonder if “evolved” is the right word. “The boats have gotten a lot bigger, as it’s economically advantageous to have more passengers,” Kearns added, but “the way these vessels have grown in size does mean finding the right balance to make sure regulations are stringent enough to ensure there are procedures like safe evacuations.” She was presuming here that cost-efficiency is a given, and, furthermore, that regulations can make up for any increased risk that comes with size.
Kearns was responding to reports that a cruise ship had hit a rock off Tuscany and partially sank several yards from an island off the coast. In the case of the partial-sinking of the Costa Concordia about twenty feet from an island just off the Tuscany coastline on Friday the 13th in January 2012, there was still confusion regarding how many of the 4,200 souls on board were still missing. That total figure of people who had been on board is about double that of the ill-fated Titanic, which went down in the North Atlantic on April 15, 1912—almost exactly a century earlier. In that case, the White Star Lines pressured the captain to light the fourth boiler to reach New York City early and "make the papers!" It did not occur to anyone that the ship's rudder was made for smaller ships, and thus it could not turn quickly enough to avoid the giant pop-cycle ahead in the cold water.
To put the two accidents in perspective, being twenty feet from an island would undoubtedly have been treated like a godsend to those people on the Titanic who perished in the icy waters of the north Atlantic. Had cruise ships become so large (and complex) that being twenty feet away was deemed to be too far? Or had cruise lines become too bureaucratic, mirroring the tendency in modern corporations generally, as per Max Weber's studies.
We forget that in James Cameron's film, Titanic, the Titanic’s designer says to the White Star Line executive who has just claimed that the Titanic—the biggest ship in the world—cannot sink,  “I assure you, good sir, it is made of iron. The Titanic will sink. It is a mathematical certainty.” A century later, it was taken for granted that Costa could not fall over in the water, yet it did—making it difficult if not impossible to deploy the emergency boats.
Regulation can be thought of as the structural walls separating sections of a ship. In oil tankers, those walls keep the oil from all going to the front or back and capsizing the ship. In the case of ships like the Titanic, the walls were designed to keep water leaking into one section from filling more sections--five were filled in the case of the Titanic because of the way the iceberg tapped along the side of the ship. Regulation does not stop at how ships are designed internally, but includes how big they are. Ideally, regulation realizes that speed, height, and size are themselves subject to regulation because the faster you go, the higher you build, and the bigger your boat or corporation, the faster you'll fall. An instinctual human urge, I submit, discounts or dismisses such risk (a.k.a. recklessness) out of a single-mindedness that narrows cognitive perspective into a fixation. Doubtless a product of eons of natural selection, this instinct is not bound to change anytime soon, so we can take regulation as a given rather than pretend that it is optional. Before the financial crisis, U.S. Federal Reserve Chair, Alan Greenspan, said he was ideologically opposed to regulating the financial sector; he thought a laissez-faire market could control its own volatility and risk. During the crisis, he briefly admitted that he had been wrong. He soon "repented" for his "heresy" and went back to the free-market line even though even competition requires game-rules, especially if the players keep getting bigger. 

"Olympic Luger Dies on Track Where Speed Caused Concern,", Febuary 13, 2011.
Steven Erlanger, “Oversight of Cruise Lines at Issue After Disaster,” The New York Times, January 17, 2012.

Tuesday, January 22, 2019

U.S. Presidents Buckle at Constraints: The Case of Obama's Recess Appointments

A constitutional system of checks and balances is premised on the assumption that government officials will seek to get as much power as they can. Constraint itself becomes a dirty word. Admittedly, the desire to resist or ignore constraints may be in human nature itself, though people differ in how much self-discipline they will bring to the task of restraining themselves from walking through constraints as if they were Chinese walls made out of paper. A constitutional system that checks ambition with ambition must not assume that some of the more beloved elected representatives can be relied on to resist the temptation to go too far. I have in mind the case of the U.S. president being able appoint officials without the confirmation by the U.S. Senate.
The President cannot decide that the Senate is on recess in order to be able to make recess appointments without  needing confirmation. This was the ruling of the federal court of appeals in Washington, D.C. The case involved the appointment of three members of the National Labor Relations Board. A three-judge panel of the court ruled that the appointments “were constitutionally invalid” because the U.S. Senate was not in recess on January 4, 2012 when President Obama made the recess appointments. If the president were free “to decide when the Senate is in recess,” it “would demolish the checks and balances inherent in the advice-and-consent requirement, giving the President free rein to appoint his desired nominees at any time he pleases,” the court opinion reads.[1] Of course, the Senate could also abuse its privilege by declaring itself in session when it is de facto in recess in order to prevent recess appointments. The balance in “checks and balances” implies that neither side is able to render the other impotent to act. In other words, neither side should try to game the constitutional system.
For its part, the White House viewed the ruling as applying only to the three NLRB appointments in the suit, rather than extending to Obama’s appointment of Richard Cordray as director of the Consumer Financial Protection Bureau (CFPB). That appointment too was made on January 4, 2012. Because the court ruled that the U.S. Senate was not in recess, it stands to reason that any recess appointment made by the president on January 4, 2012 was invalid. Even so, White House spokesman Jay Carney said that Obama’s appointment of Richard Cordray was not affected by the court’s decision. “The decision that was put forward today had to do with one case, one company, one court,” Carney said. “It has no bearing on Richard Cordray.” I contend that it did.
The ruling states that no recess appointment can be made by the president when the U.S. Senate is not in recess. Even if the Obama Administration disagreed with the ruling, to narrow it dogmatically to just three of the appointments made when the U.S. Senate was not on recess (as determined by the court) is nonsensical. Besides offending reason itself, the “reasoning” evinces a tendency then in the White House to evade the very notion of constraint. The same tendency could be discerned in the next president as well, suggesting that to protect the viability of the constitution it is necessary for Congress to keep a vigilant eye on the executive arm of the government. In other words, resisting constraint itself is likely in human nature itself and thus must be closely watched in cases in which a lot of power is involved. 

 1. Tom Curry, “White House Sees No Impact of Court Ruling on Finance Protection Agency,” NBC News, January 25, 2013.