President Obama's Proposal to Rescue States: Unattended Problems in American Federalism and Human Sustenance

In 2011, President Obama proposed "to ride to the rescue of states" that had borrowed billions of dollars from the federal government to continue to pay unemployment benefits during the economic downturn. His plan was to "give the states a two-year breather before automatic tax increases would hit employers, and before states would have to start paying interest on the loans." Many of the states had begun the recession with "too little money in their unemployment trust funds'" Those states "quickly ran through what little they had as unemployment rose and remained stubbornly high month after month. With their own trust funds depleted, 30 states borrowed $42 billion from the federal government to continue paying unemployment benefits." These states were facing an estimated $1.3 billion in interest payments to Washington due in the fall of 2011. The President’s proposal also included raising the minimum taxable wage base from $7,000 to $15,000 in 2014. "The rate of the federal portion of the unemployment taxes would then be lowered, so the proposal would not raise federal taxes on states that do not owe the federal government money. But it would speed the rate at which states that do owe money repay the federal government, and allow states to collect more unemployment taxes to rebuild their trust funds if they do not lower their tax rates." By February, 2011, eighteen states had already raised their minimum taxable wage base to $15,000 or more, according to the National Association of State Workforce Agencies. Iris Lav, an adviser at the Center on Budget and Policy Priorities, said that the unemployment system was “a constellation of problems" that needed to be solved." She added that the near-term problem was the economy, and "both the interest payments and the principal repayments are [were] cutting into employers, and it [made] great sense to postpone them." The larger question was how to "get states to solvency.”[1]

Analysis of the proposal:

The proposal itself makes sense from the standpoint of getting thirty states out of a tight fix at the time. The debate on whether taxes should go up in 2011 or 2014 was less important than attention to the larger structural fault-lines, which are only hinted at in the President's proposal to ease up on States in debt at the time due to their participation in the unemployment compensation system. To be sure, it is important to note that having extended the length of unemployment-compensation's term to cover the length of the recession following the financial crisis of 2008 required either higher taxes or more debt. Both Reagan's and (George W) Bush's tax cuts had not paid for themselves, so a tax cut, especially during the severe recession, would not have covered the bill. What is good for people and companies facing high tax bills is not necessarily in the public good, and thus good public policy. Even so, I want to stress the larger structural fault-lines that are implicit in the President's proposal, for subterranean tensions rarely reach the surface of a society's consciousness. 

First, under the proposal, the "rescue" was to be limited to the states' respective debt from paying unemployment compensation; neither the Federal Reserve nor the U.S. Government would have been able to come to the rescue of the states concerning their entire deficits and debt. In fact, due to the "crowding out" tax effect, the more that the U.S. Government takes in, the less the state governments can politically raise taxes to cover their respective deficits and debts. Moreover, implicit in the notion of coming to the rescue of is the dependence or lower position of the rescued. In a viable federal system, neither the federal government nor state governments is subservient to the other, for otherwise both could not serve in the systematic role as a check on power. 
Perhaps the "cooperation," or intermixing, of the two government systems (that of the states and that of the federation) in the unemployment system is problematic because it gives the U.S. Government a way to dominate the states. According to Jacobs and Karst, “It is the preservation of the balance between the central authority and the constituent states that is the essence of federalism.” Yet, “[i]n the American federal structure the central authority is stronger."[2] Rescuing thirty states attests to the overweening power of the federal head, and thus the imbalance that is so problematic in the long term to a federal system of checks and balances.[3] 
Ken Wheare claimed in his text, Federal Government, that maintaining at least one autonomous domain for the states is sufficient for a viable federal system of dual-sovereignty. I disagree; a state with one power and otherwise "surrounded" by a federal government with many is not de facto semi-sovereign even if so de jure. In his text, Wheare's statement is utterly inconsistent with his other contention that the two systems of government in a federal system must be able to act as a check on each other. Balance is simply not possible if the state governments have only one or even a few areas of sovereignty whereas the federal government has many and can even pre-empt states from legislating in an area in which the federal legislature has no intent to play an active role legislatively!
To the extent that President Obama's proposal was debated in terms of rescuing the thirty states and whether to raise taxes in 2011 or 2014, the discourse failed the opportunity to include the broader questions pertaining to what is necessary to preserve the American federal system; the superficial debate meant blindly sitting by once again while the political consolidation of a diverse continent proceeded full throttle ahead to a "one size fits all" federation.  The building pressure from the unaccommodated natural diversities would go on, likely to explode one day. 

Second, the fitness of the unemployment-compensation system itself, being limited to helping the unemployed for discreet periods often shorter than a recession, is not touched on in the proposal. For instance, the X-weeks limit of compensation as the program's default could have been addressed, as it treats "convenient" things like food, rent and utilities as though they were optional commodities that could be skipped after the Xth week on unemployment-compensation. In short, the matter of necessities being conditional warranted debate because of the underlying assumption that the very survival of a human being is (or should be) conditional. Doubtless it is in Hobbes' state of nature, but even he accepts a right of self-preservation even under a Leviathan. In other words, the natural urge to preserve oneself is not conditional, so a conditional government program covering basics is not natural or in sync with human beings.  
Relying exclusively on business to bring an economy to full employment is problematic in that that goal has rarely been achieved anywhere without government to pick up the slack. From the standpoint of survival as a human right, laissez-faire economics is thus insufficient. To be sure, the recognition of survival as a human right, as is the case in the E.U., requires higher taxes than are necessary in simply treating survival as a conditional matter. This broader debate and thus the broader fault-line are typically ignored as Americans debate incremental or temporary changes in legislative or executive proposals bearing on public policy.

1. Michael Cooper and Sheryl Stolberg, "Obama Plans to Rescue States with Debt Burdens," The New York Times, February 8, 2011.
2. Jacobs, Francis G. and Kenneth L. Karst, “The 'Federal' Legal Order: The U.S.A. And Europe Compared A Juridical Perspective,” in Integration Through Law: Europe and the American Federal Experience, Mauro Cappelletti, Monica Seccombe, and Joseph Weiler, eds., Vol. 1, Methods, Tools and Institutions. Bk. 1, “A Political, Legal and Economic Overview” (Berlin: Walter de Gruyter, 1986), pp. 169-244, p. 171.
3. Skip Worden, Essays on Two Federal Systems: Comparing the E.U. and U.S., and American and European Federalism: A Critique of Rick Perry's "Fed Up!" 

Sustenance: A Human Right in America?

In the fall of 2010, the following was said on Fox News: “The government should spend more on the war in Afghanistan in order to fight terrorism. The problem is that the government has gotten into entitlements.”  The latter presumably includes food stamps, public housing, Social Security, Medicare, and Medicaid.  To say that government ought to be engaged in defense and not in supplying needy citizens with food, shelter and health-care is distinct from saying that the federal government should concentrate on foreign policy and defense, while entitlements are formulated and funded by the state governments as their domestic programs. In other words, advocacy for a certain priority in government and for less government is distinct from advocacy for restoring balanced federalism.

Most Europeans in the E.U. undoubtedly view the redistributive right for sustenance resources as founded on human rights and thus as a legitimate part of government.  In contrast, Americans do not typically apply a human rights justification to entitlements for other Americans even as foreign aid may be justified in part on this basis.

For example, on June 3, 2011, Donald Trump told a forum in Washington, D.C.: "A certain Republican representative, two nights ago -– I watched on television -– Representative Cantor, who [sic] I like, said we don't want to give money to the tornado victims, . . . (a)nd yet, in Afghanistan we are spending ten billion dollars a month but we don't want to help the people that are devastated by tornadoes -- wiped out, killed, maimed, injured. We don't have money for them but we are spending ten billion dollars a month in Afghanistan. We are spending billions of dollars in Iraq where they have the second largest oil fields in the world … and we can't help people that got flooded in Mississippi that got hit horribly by tornadoes." The U.S. House Majority Leader was holding up funds for basic necessities at home as leverage in debt-ceiling negotiations with the Democrats, while allowing billions of dollars to continue to flow in foreign aid (and to the U.S. military in Iraq and Afghanistan).  Canter’s antipathy toward government aiding citizens who would otherwise be left to the state of nature represents a rather warped understanding of a social contract.

People such as Eric Canter believe that the market mechanism trumps any right to have one’s basic needs satisfied. Resources are viewed as commodities produced and distributed by private enterprise, even though the market does not guarantee that every citizen’s basic needs are met. Even so, it can be asked whether the right to survival (i.e., life) is part of the American social contract. If so, then relying on the market mechanism alone is not sufficient.

If life is not part of the social contract, then the hungry and homeless, as well as the untreated sick, are (and can legitimately behave as if) in the state of nature. As much as some of the rich do not want to be taxed so the least fortunate can survive, the prospect of the latter behaving as if in the state of nature must surely be even less palatable.

James Madison writes in Federalist #51, “the weaker individual is not secured against the violence of the stronger” in the state of nature. Nor is the weaker secured against starvation and sickness.  Without the police to protect their property, are the rich sufficiently strong to ward off the hungry and homeless? Who is the strong and who is the weak in a dog-eat-dog contest between two human beings—one with a bank account and the other with a left hook? Life, Thomas Hobbes writes, is “solitary, poor, nasty, brutish and short” in the state of nature are all equal in the sense that any one of us can be killed in our sleep. Suddenly having some of one’s tax directed on a human-rights basis may not sound so bad.

What keeps those whose survival is so tenuous from simply taking from the rich is of course the funded social contract that protects property with police force even as there is no guarantee for survival. Such a warped social contract is an aberration in terms of social contract theory.

  The social contract undergirding a political society is meant to alleviate the fear of the want of necessities (and self-defense) while working for the happiness of the members.  In other words, there is a right to shelter, food and medical care. Otherwise, the society is only marginal or partial in obviating the insecurity that exists in the state of nature.

Therefore, to say that government should merely defend citizens from the insecurity of foreign invasion does not go far enough from the standpoint of why government is instituted as part of a social contract that takes people out of the state of nature. However, to say that an empire-level government ought to be charged with protection from foreign invasion, while the individual republics are tasked with ascertaining their citizens with protection from starvation, the elements, and sickness. Without anxiety, foreign or domestic, every citizen—rich or poor—would be freed up from a basic insecurity that without a viable social contract is simply part of life.

Sources:

The Federalist, ed. Jacob E. Cooke, Hanover, N.H.: Wesleyan Press, 1961.

Sam Stein, “Trump Takes Aim at Cantor, Krauthammer, U.S. Foreign Policy,” The Huffington Post, June 3, 2011.

Paper Tigers: Firewalls Forestalling Institutional Conflicts of Interest

Structural, or institutional, conflicts of interest are of great significance in applied ethics, even though they often play second fiddle to the conflicts centered on a person’s particular interests. An organizational or institutional conflict of interest, whether within one organization or in the arrangements between organizations, is not any less unethical than a personal conflict of interest.  Therefore, when we take the claims of vested organizational interests that their internal firewalls are more than just paper tigers at face value, our foolhardiness can really be at our detriment. I present a few cases to suggest that “firewalls” in an organization to prevent it from a conflict of interest are, in general, insufficient and thus ought not be relied on. Instead, the public (or government regulatory agencies) should insist that one of the two interests in an institutional conflict of interest be given up.

The full essay is at Institutional Conflicts of Interest, available at Amazon. 

Federalism Facilitating Self-Preservation

The rights to life, liberty and the pursuit of property (Locke) or happiness (Jefferson) can all fit within a federal system that enables its two systems of government—that of the federation itself and the republics  or (member) states—to check and balance each other. The alternative, at least for a federal empire, may be a return to the state of nature.

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