E.U. President Von der Leyen Survives A No-Confidence Vote

Falling short of the two-thirds majority needed to pass on July 10, 2025, the no-confidence vote on President Von der Leyen of the Commission in the E.U.’s parliament mustered only 175 representatives in favor while 360 voted against the motion and 18 abstained. Although commentators discussed whether the president was weakened anyway, a more important matter relates to the politics of the vote as distinct from the Parliament’s institutional interests as they relate to the Commission and the European Council. I contend that the Parliament, which represents E.U. citizens, has a vital interest that is vital to the E.U. itself in maintaining a balance between the collective power of the representatives of the citizenry and the power the state governments at the federal level. Parties making deals with Von der Leyen on policy positions undercut the vote as a means of holding the Commission to maintaining that balance.

For example, the Socialists and Democrats Party “extracted a pledge on the next long term budget in exchange for their support.”[1] The right-wing Patriots for Europe Party and Europe of Sovereign Nations Party both voted in favor of removing Von der Leyen, but certainly not because she left made a deal with the states to sidestep the Parliament on certain matters of policy, for those parties favor more power for the state governments at the federal level. In fact, those parties even deny that there is a federal level! Therefore, we cannot assume that the vote of no-confidence was on the matter of the Commission siding with the state governments to marginalize the Parliament.

The Commission under Von der Leyen had “invoked Article 122 of the Treaty of the Functioning of the European Union (TFEU) to set up SAFE which allows member states to directly approve a Commission proposal ‘if severe difficulties arise in the supply of certain products’ or if a member state is ‘seriously threatened with severe difficulties caused by natural disasters or exceptional occurrences beyond its control.’”[2] Because the Commission and the state governments were able to set up a federal defense-loan program without the approval of the European Parliament, and thus the citizens of the E.U., Roberta Metsola, the head of the Parliament, wrote to Von der Leyen of the “deep concern” in among the representatives that excluding the Parliament meant “putting at risk democratic legitimacy by undermining Parliament’s legislative and scrutiny functions.”[3] The democratic legitimacy of the federal level depends on the involvement of the Parliament, as it is the only institution representing E.U. citizens directly, rather than state governments, which have their own institutional interests even apart from state residents.

It is highly significant that Metsola “stressed that ‘the European Parliament is not questioning the merits of this proposal for a regulation’.”[4] The objection was not one of policy; rather, the concern was based on the democratic viability and overall balance of the E.U. itself as a federal system. By involving policy in the deal-making leading up to the censure vote, certain political parties in the Parliament undercut that institution’s interest in protecting itself against the Commission giving too much power to the state governments at the federal level. The Socialists should not have extracted a political gain from Von der Leyen, and the Green Party members should not have voted on the basis of how much Von der Leyen had prioritized environmental policy. Instead, the parties apprehensive about the Parliament having been circumvented by the state governments and the Commission should have voted to offset the state-rights ideology of the far-right parties in the Parliament. Had this been done, the next Commission would have been very cautious about circumventing the voice of the people by making deals with the governors of the several states. 

Generally speaking, protecting the viability of the federal system itself, including the checks and balances at the federal level, does not get done by prioritizing political deals and even particular policies, as if the pushing for certain policies in the aggregate were tantamount to protecting the system of governance itself.

1. Jeremy Fleming-Jones, et al, “Von der Leyen’s EU Commission Survives Parliament Confidence Vote,” Euronews.com, July 10, 2025.
2. Alice Tidey, “MEPs Vote for Parliament to Sue Commission over €150 bn Defense Loan Programme,” Euronews.com, June 25, 2025.

3. Ibid.
4. Ibid.

The European Commission as Political

The European Commission, the E.U.’s executive branch, has been known for being a technocratic institution. Yet in drafting regulations, imposing fines, and negotiating trade deals, the Commission is much like the U.S.’s executive branch. In fact, high-level appointments must secure the approval of the legislature through confirmation hearings. Yet the top of the U.S. executive branch, the White House, has been known for being ideological and definitely political. That that executive branch also promulgates and enforces regulations can be easily missed. That the E.U.’s executive branch is also political has definitely been missed or dismissed in the ideological illusion that the E.U. is merely a technocratic international organization rather than a federal system of governments. This illusion could finally be seen as such after the election of Ursula van der Leyen as President of the European Commission in 2019.

Her announcement of new titles for commissioners sparked ideological controversy because the titles themselves are inherently ideological. One commissioner would be “for Democracy and Demography,” while another would be “for Protecting our European Way of Life.”[1] Besides the inappropriateness of using office titles as ideological placards, the insertion of ideology at the top of the Commission must have surprised many Europeans who were under the ideological impression that the E.U. was merely an international technocratic organization rather than a federal system with a federal government.

The “once technocratic institution,” the Commission, was, according to van der Leyen a “geopolitical commission.”[2] Finally an explicit acknowledgement is made that the E.U. is geopolitical, and thus a federal government, rather than just a trading “bloc.” That The New York Times consistently applied this label to the E.U. in spite of the fact that it had not only an executive branch, but also a legislative one (The European Counsel and the European Parliament) and a judicial one (the European Court of Justice) boggles the mind. Unthinkingly swallowing the European illusion has effectively enabled it, and thus forestalled the day when Europeans would finally realize what they have created.

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[1] Valentina Pop, “EU’s New Boss, Invoking ‘European Way of Life,” Sparks Partisan Brawl,” The Wall Street Journal, September 19, 2019.

[2] Ibid.

Recommended: Essays on the E.U. Political Economy: Federalism and the Debt Crisis. See also Essays on Two Federal Empires: Comparing the E.U. and U.S. Both are available at Amazon.

The U.S. Justice Department and Facebook: Secretly Mining Personal Information

Collusion between business and government has hardly been a rarity; the extent of secrecy regarding it , however, may be a surprise. Whereas business-government economic partnerships (as well as university-government partnerships) have typically been made public, the extent to which government uses businesses to get information on citizens has hardly been transparent. In spite of a U.S. federal law enacted in 2015, documents released in September of 2019 “show how far beyond Silicon Valley the practice extends—encompassing scores of banks, credit agencies, cellphone carriers and even universities.”[1] The documents, which cover 750 of the half-million subpoenas issued since 2001, reveal that more than 120 companies and other entities received subpoenas for information on customers, users, or students. F.B.I. could lawfully “scoop up a variety of information, including usernames, locations, IP addresses and records of purchases” without a judge’s approval.[2] A gag order keeps the businesses from divulging even the receipt of a subpoena. So much secrecy accompanying so much power is, I submit, dangerous to a republic. In fact, the subtle effects on citizens in the public square can easily be overlooked even if the negative impact on freedom is serious.

The documents reveal that the credit agencies received a large number of subpoenas, as did financial institutions like Bank of America. Universities including Kansas State University and cellular providers including AT&T and Verizon, as well as tech companies like Google and Facebook also received subpoenas. The public was kept in the dark, due to “several large loopholes” enabling the U.S. Justice Department to refuse even to review “a large swath” of gag orders.[3] Loopholes have been a common practice in legislation impacting business, given the power of large businesses or industries to influence lawmakers via large campaign contributions. I submit that the loopholes enabling secrecy on the subpoenas are even worse for a republic’s viability because of the extent of governmental power that is possible from mining private data on citizens. The potential uses—again in the dark—go well beyond reducing or preventing crime.

Political uses, for example, should not be discounted. Even as Facebook’s CEO, Mark Zuckerberg, was assuring users that they had control over what data is shared, the company’s COO had devised a business model that would substantially raise Facebook’s revenue by secretly allowing third-party “app” companies access to user data. The practice enabled Cambridge Analytic to influence users politically without the users’ knowledge. In the case of the F.B.I. subpoenas, partisans in governmental roles could conceivable gain access to the data through political pressure (e.g., from Congress or the White House).

Moreover, I submit that a government with a lot of information on citizens is totalitarian with respect to information, and such a near-totality can easily breed a totalitarian state in the sense of control over citizens. They in term could be expected to increasingly fear sharing personal data with businesses. In 2018, for instance, I tried out Facebook. After just weeks with an account, I was surprised when the company demanded that I send a photo in which my face is recognizable. I had read that the company had been working on facial recognition technology, and the explicit demand for a recognizable face seemed strange to me. I also knew that Facebook regularly shared user information with third-parties, whether business or governmental in nature. I had nothing to hide, but I did not like feeling invasiveness even in the demand itself. So I experimented by taking a picture on a public sidewalk of a poor person not likely to have an account. Facebook deleted my account without explanation. I would have deleted the account anyway rather than use a fake picture. I wanted to see whether Facebook would use its facial-recognition technology to assess the picture. Either the person whom I photographed had an account or Facebook already had access from an external entity (such as my web-site) of my face. Even just the use of secret software to assess the photo I had submitted struck me as excessive, and I would not have been surprised to discover that Facebook had access to more personal information that what I had shared on my account. Facebook itself could be said to be a private totalitarian state. Given the compromised ethics in the company’s brief history, I felt uncomfortable with Facebook having any of my personal information and, moreover, concluded that such a company with a totalitarian approach to information as a means at the very least of raising revenue is major problem. Sadly, given the susceptibility of the Congress and White House to political influence from large campaign-contributions,  the company’s wealth and thus political pull could keep a law from being enacted that would force Facebook to permanently remove all information pertaining to me at my written request. It would be interesting if any U.S. citizen could have access to any data collected by the F.B.I. from businesses and other external entities unless deemed classified by a judge in the Judiciary. The purpose would obviously not be to help criminals.

With personal data being provided on “social networks,” as well as to other companies, banks, phone companies, and internet providers (including universities), and with the U.S. Government having unlimited access to that information, a person could be expected to feel that he or she has a contracted personal space. Even in one’s home, if a cell phone or computer is on (and even if it is off, I have read), the government may have a way to look in. Not even a personal conversation on a cell phone can any longer be regarded as private. The sphere of a sense of freedom of expression has likely come to be feel very restricted. I suspect that Americans have resisted this encroaching de facto sense of limitation on their personal freedom by being in the illusion that an actual phone call is private and that neither a government agency nor Facebook is keeping tabs on which sites are being visited or what is being said or done on a phone. Yet the diminishment of the sense of freedom, especially when a person is in public but also on private property, is real, which a decrease in the quality of life going along with the masked fear. The People can regard this constriction of freedom as being subject to the Will of the People rather than merely something that can evolve by means of vested interests inside and out of government. In other words, an electorate need not be passive.

Moreover, a government’s totalitarian approach to gaining information on the citizenry is contrary to the notion of a limited government wherein the People are the popular sovereign. A limited government is a key part of a republic, whereas a totalitarian government is vital to a dictatorship wherein the People have no power. Adding to the concern is a private company’s totalitarian approach to information-gathering, especially if such a company has lied to its users about it. Interestingly, the third-party commercial app makers can be considered the company’s clients, whereas the users supplying the data are suppliers. In other words, the users are not the customers. The suppliers are not paid in monetary terms; rather, Facebook pays those bills by allowing the suppliers to use the company’s platform—activity that increases the supply of information!

In supplying something, a supplier transfers a commodity to a buyer; the supplier cannot claim ownership or control of the commodity once it has been supplied. Obviously if the buyer lies to the supplier regarding the contract, the supplier has grounds to take back the commodity supplied. The suppliers did not agree (and thus were not “paid”) to allow Facebook to contract with Cambridge Analytic, a client, to use the commodity to manipulate the suppliers themselves. To be sure, ordinarily a supplier would not expect to have any say as to what a buyer does with the commodity, but Mark Zuckerberg made oral promises that the company’s user-suppliers would continue to have a veto over how Facebook uses the commodity, including with whom the said commodity is shared. Because the CEO lied, it is important for the suppliers to realize that what had begun as a social network for college students became a business model. Unfortunately, the typical user is not even aware that he or she is actually a supplier. 

Government use is of course different; it can legally be done secretly, thus without the knowledge of Facebook’s suppliers. So it becomes a political question of whether the People should allow their government, assuming it is a republic, to have access. Citizens would be wise to remember that absolute power corrupts absolutely, and that with great power comes a huge responsibility even if the powerful may tend to shrug off the responsibility as they seize even more power.

See related: Taking the Face Off Facebook: Strategic and Ethical Issues, available at Amazon.

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1. Jennifer Valentino-DeVries, “Secret F.B.I. Subpoenas Scoop Up Personal Data From Scores of Companies,” The New York Times, September 20, 2019.

2. Ibid.

3. Ibid.

Should Health Care Be a Right?

In the Spring of 2019, President Trump promised that a Republican alternative to "Obamacare" would soon be unveiled; the majority leader of the U.S. Senate, Mitch McConnell, quickly informed the president that the prospects of such legislation passing the Democratic-controlled U.S. House were zilch. This virtually guaranteed that health care would be play a salient role in the upcoming 2020 presidential race. The underlying question, I submit, has been whether health care ought to be a right, which the government would be obligated to ensure. Such a right would obviously not be one of those that hold government back (e.g., the right to liberty). Whether a right ensured by government or holding government back, the nature of a right is such that it is to be respected by others, whether individuals, organizations, or the state. Such respect, being an obligation, constrains those others. Hence, health care as a right has been controversial in the U.S. 
The Senior US Senator from Illinois, Dick Durbin, said the following just before one of the votes in December, 2009 on the Affordable Care Act, the health-care insurance reform legislation initiated by President Obama: “Thirty million Americans who currently don’t have health insurance  have the peace of mind of knowing that they have health insurance,” Mr. Durbin said. He added, “This is a real debate over whether or not health care is going to be a right or a privilege in America.”[1] By using the word, privilege, Sen. Durbin was implying that having access to health care on the sole basis of whether a person has money is unfair. 
If being wealthy is a good indication of being worthy of survival, then it may be assumed that health care for all, whether through private, non-profit, or government insurance, would undermine survival of the fittest. This in turn takes fit to mean strong or good. Were the humans in the financial sector before the financial crisis of 2008 strong or good? Does not fraud point to an underlying weakness? When Dick Fuld was CEO of Lehman Brothers before it collapsed, was he a strong leader or a pitiful man whose ambition got the best of him? 
In "survival of the fittest," fit has to do with fitting in with a changed environment. Such fitness, or fit, is on nature's terms rather than necessarily according to our notions of strong and good. For instance, a young drug dealer in a large city may have twelve "baby mamas." This means that the man had impregnated twelve women, who had been attracted to him on some basis that they valued. The sheer number of offspring suggests that the man was successful in reproducing himself; he thus fit well in his environment on this nauralistic basis. If survival of the fittest lies the availability of health care, should that man be covered while a poor religious man who has contributed to society without earning much money or having children should not? 

See also "Congressional Cuts to Foodstamps: Violating a Human Right?"

1. David Herszenhorn and Robert Pear, "Parties Stay United as Health Bill Clears Steps in Senate," The New York Times, December 22, 2009.

U.S. Attorney General Barr's Decision on the Mueller Investigation of President Trump: On the Invisible Personal and Institutional Conflicts of Interest

On March 24, 2019, U.S. Attorney General William Barr sent to Congress his summary of Robert Mueller's report on whether President Donald Trump's 2016 campaign had colluded with the Russian government and whether the president had obstructed justice. According to Barr, Mueller had found no evidence of collusion. As for obstruction, Barr wrote that Mueller "did not draw a conclusion one way or the other as to whether the examined conduct constituted obstruction."[1] On this point, Mueller himself had written that 'while this report does not conclude that the president committed a crime, [the report] also does not exonerate him."[2] Mueller had laid out evidence and arguments on both sides of the question of obstruction, and Barr determined that the "evidence fell short of proving [that the president] illegally obstructed the Russia inquiry."[3] The New York Times went on to call this "an extra-ordinary outcome."[4] 
Barr did not detail his reasoning in deciding the matter of obstruction. According to the New York Times, he "appeared to be focusing on the question of whether investigators could prove that [President Trump] had 'corrupt intent' in instances where the available evidence about his motivations was ambiguous."[5] But in focusing on a lack of evidence that the Trump campaign reached any agreement with the Russian government on sabotaging the election, legal experts said," Barr "left out other reasons the president may have had for wanting to stymie a wide ranging investigation: It could uncover other crimes and embarrassing facts."[6] In other words, Barr's parameters may have been too narrow. 
The way Barr framed the contours for his decision might not have been an accident, given his personal conflict of interest. More important than this, I submit, is the continuing institutional conflict of interest facing the Justice Department in investigating its boss, the chief executive. After Congress had received Barr's summary, U.S. Sen. Lindsey Graham pointed on Fox News to former Attorney General Jeff Session's personal conflict of interest (Sessions had been part of Trump's campaign that was being accused of collusion with the Russians). Unfortunately, the senator mentioned neither Barr's personal conflict of interest or the broader institutional one facing the Justice Department. Such denial may have been partisan in nature, but I contend that institutional conflicts of interest tend to get a pass in American society. In the case of the Mueller investigation, Americans as a people put the conflicts of interest aside in looking forward to the conclusions from within the Department of Justice. This point, I submit, ought to be viewed as extraordinary. I turn now to the conflicts of interest.
According to The New York Times, when Barr "stepped in to make the determination," he brought "the specter of politics back into the case."[7] I submit that any Attorney General would, and I submit should trigger partisan suspicions in making a determination on a matter in which the chief executive (i.e., the president) is being investigated. 
As for the personal conflict of interest, even though Barr "had taken over the Justice Department [just a month earlier] pledging to defend its independence," he "ended up clearing a president who [had installed] him in the post."[8] This is significant not just because President Trump had been emphasizing loyalty (and dismissing the disloyal) from his subordinates in the executive branch; any pledge of independence represented a personal conflict of interest for Barr and an institutional conflict of interest for the Justice Department, as neither were legally independent of the chief executive, the boss. 
In fact, President Trump's choice of Barr was likely tied to the Mueller investigation. Barr had written a memo as a private citizen to Justice Department officials in June, 2018 insisting that special council Mueller's obstruction inquiry was "fatally misconceived." [9] A president's use of executive powers are beyond the reach of criminal law, regardless of the motive.[10] Such uses include firing a subordinate and directing the Justice Department to close a case. It is just human nature to be motivated to direct the department to close a case against the person himself. Even so, Barr argued that "Trump asking then-FBI Director James Comey to let go of the investigation into former national security advisor Michael Flynn and later firing Comey [were] within [the president's] powers as head of the executive branch." and thus not subject to being investigated, according to Trump's Attorney General before he was nominated.[11]
That Barr's memo would have gone unnoticed in the Trump administration and especially in President Trump's subsequent decision to nominate Barr for Attorney General is too incredulous to be taken seriously. In appointing Barr, the president was essentially securing his rightful control of the branch under him. This point alone gives us an indication of the gravity of the institutional (and constitutional) conflict of interest in the Justice Department investigating its boss, the president--the chief executive, which includes chief law enforcer. 
It stands to reason that none of the departments under the chief enforcer can enforce the law on the chief. I contend that President Trump was exploiting this conflict of interest to give the public the appearance of a credible investigation having been done with the president coming out clean. This appearance, if taken seriously, ignores the underlying conflict of interest that should be recognized as blatant. 
The Justice Department cannot investigate its boss, the president, without risking the extortion of the institutional (and perhaps personal) conflict of interest. That is, the executive branch investigating its boss constitutes a conflict of interest that essentially eliminates that branch as being able to perform such an investigation, at least in terms of credibility. Unfortunately, the American people ignored or dismissed the conflict of interest by relying so much on Mueller's report and Barr's subsequent determination. 

To be sure, Congressional oversight exists when another party controls the U.S. House or Senate (or both), but this renders the judgment subject to political forces, or at least as being viewed as partisan. Facing the conflict of interest within the Justice Department and the political oversight of the U.S. House, Mueller may have chosen the latter anyway, laying out whatever evidence he had for and against obstruction. He doubtlessly knew of Barr's memo, which likely reflected the attitude at the top of the department towards the investigation of any obstruction of justice. 
In general, the American people have risked a corrupting government structure in being so naive about institutional conflicts of interest within the U.S. Government. Simply put, corruptible conflicts should be deconstructed. For example, an alternative to department in the executive branch should be created or chosen when the chief executive is the subject of the investigation. Congressional oversight could be used if another party than the president's controls at least one chamber. An alternative would need to be created should Congress lack the political will to launch an oversight investigation. That this has not been done says something unfortunate about how Americans view even constitutional conflicts of interest.   

See Institutional Conflicts of Interest, available at Amazon.

1. Eli Watkins, "Barr Authored Memo Last Year Ruling Out Obstruction of Justice," CNN.com, March 24, 22019.
2.Mark Mazzetti and Carol Benner, "Mueller Finds No Trump-Russia Conspiracy but Stops Short of Exonerating President on Obstruction," The New York Times, March 24, 2019.
3. Charlie Savage, Mark Mazzetti, and Katie Benner, "Barr's Move Ignites a Debate: Is He Impartial?" The New York Times, March 26, 2019.
4. Ibid.
5. Ibid.
6. Ibid.
7. Ibid.
8. Ibid.
9.Watkins, "Barr Authored Memo."
10.Savage, Mazzetti, and Benner, "Barr's Move Ignites a Debate."
11.Watkins, "Barr Authored Memo."

On the Futility of Divided Government at the Empire Level: The Case of the U.S.A.

Rick Perry, when he was the Republican governor of Texas running for re-election, said his primary opponent, Senator Kay Hutchison, was spending tax dollars too freely in Washington. He meant that she was too Washington. He claimed that she didn't get what he called, “Texas values.” Then, he added something really telling—something that went beyond his electoral contest: “Washington’s one-size-fits-all approaches simply don’t work. They want more control of your dollars and your life, and they want it now. We surrender that to them with peril.” His statement is worthy of our reflection even long after Perry's re-election campaign.

The frustrating matter during the summer of 2011 of whether (and how) the debt ceiling of the U.S. ought to have been raised shows just how difficult it is to get all of the factions on board in passing a law. When both major parties must agree for a bill to become a law, “the opposition” is part of the government. No parliamentary system would mandate that a government (i.e., governing coalition) must get its opposition on board for laws to be enacted. This is true enough even on the level of EU and US states; for a diverse union of such states to require that almost every faction agree is foolhardy. In other words, “divided government” at the empire-level gives the inherent diversity too much leverage with which to block governmental action.

Why doesn’t a one-size-fits-all approach not work in the United States at the federal level? First, an empire consisting of member states or republics is inherently diverse, given the scale of the countries themselves. Imperial-level legislation should take into account the different political entities that constitute or are members of the empire, even if the legislation applies directly to individuals (rather than to the member states). Otherwise, pressure from the real differences will build—potentially blowing the Union apart eventually.

Second, governments have ruling and opposition parties for a reason: getting all of them to agree for a bill to become a law is unrealistic given the extent of ideological distance from the far right to the far left. Compromise is difficult enough within a governing coalition. Even though having a “divided government” allows for better checks and balances, it is a recipe for nothing getting done. One size does not fit for all parties, which are themselves coalitions. Perhaps we like divided government because we are so scared about what a governing coalition might actually do. As a consequence, gridlock.

On European and American federalism compared , see Essays on Two Federal Empires, available at Amazon. See also, "American and European Federalism, a short critique of Perry's book on federalism, Fed Up!

Handouts in Averting the Fiscal Cliff: The Price of Politics?

What is that nebulous thing called politics? Might it be that the practice is essentially exploiting or creating what are known as principal-agent costs? That is, might politics boil down to a skill in the agent (elected representative) in putting his political or economic interests ahead of doing the bidding of his principal(s) (i.e., his constituent body).  
In the U.S. Senate bill in early 2013 to obviate the “fiscal cliff,” for example, the Democrats may have agreed to benefits for the Republican lawmakers’ campaign backers in exchange for going along with a more progressive federal income tax system. Among the added provisions were special expensing rules for certain film and television productions—no doubt those made by particular campaign contributors. The provision for tax-exempt financing for the New York Liberty Zone around the former World Trade Center may also have been a favor to a particular someone. Lest it is wondered what an extension of the American Samoa economic development credit was doing in an expedited measure to obviate the “fiscal cliff,” the answer may have had to do with a particular Republican lawmaker’s relationship with someone having an interest in American Samoa. I can only speculate here, as I was not privy to the actual relationships and negotiations. However, the sheer strangeness of such provisions in such a bill suggests that the particular political or economic interests of particular Republican lawmakers may have been the culprit.

 Is money the language of politics?    citizen.org

Such interests need not stem from particular relationships. To get the Republicans to “move on principle” regarding progressive taxation, the Democrat negotiators may have agreed to give on particulars on another law—in this case, Obamacare. The bill also contained a provision to remove the Community Living Assistance Services and Support program, or CLASS, which was proposed to enable millions of elderly and disabled people to stay in their homes rather than be placed in institutional care.

Generally speaking, the pattern involves essentially “buying off” particular lawmakers so they will “shift over” on a larger principle—in this case, progressive taxation. Give a bit on Obamacare and include a provision financially beneficial to a particular Republican lawmaker or one of his or her financial contributors or patrons—anything satisfying a particular interest of a particular lawmaker—so he or she will move from the preference of his or her constituents. The agency cost is the difference that a lawmaker (agent) skirts for his own political or economic interest from doing the bidding of his or her official constituents (principals).

If the skill called politics involves a politician’s particular interests at the expense of one of his or her principles or official duties (i.e., to constituents), then negotiation cannot be expected to be confined to compromising on the merits of the bill itself. Rather than merely going back and forth on numbers for the upper income subject to the Bush tax cuts, a Republican negotiator might propose an unrelated provision benefiting one of his or her friends, business associates, or campaign contributors. Granted the provision, the negotiator would then give on the numbers. One might ask whether the inclusion of particular exogenous interests is necessary to negotiation on a given policy. Wouldn’t the final product in terms of the policy be better were the unrelated benefits kept out of the mix? That is to say, is their incorporation a decadent or inferior form of politics, or an essential element that cannot be removed? Perhaps the answer lies in whether negotiation on a given policy, such as deficit reduction, can be done without the negotiators bringing up their particular interests (as a means of shirking their principles or duty). Perhaps ethical leadership in politics involves refusing to enable (or exploit) another’s “agency costs” by incorporating the unrelated provisions, in which case politics itself could find higher ground and the resulting policy would more closely match the preference of the body politic.  

Source:

Reuters, “Fiscal Cliff Bill Proposed By Senate Packed With Mix of Handouts, Takebacks,” Huffington Post, January 1, 2013.

Picking a President by Polls

It is one thing to say that something is broken; it is quite another thing to fix it. In such a case, if it ain’t broke, don’t fix it doesn’t cut it. Any pathological fear of change must give way or the brokenness must be endured. During the last half of 2011, over a year before the U.S. presidential election, the election season was already in full swing. Without any primaries or caucuses, the media and “debate” (i.e., talking points) organizers divided the Republican candidates into two tiers. Besides being an artificial dichotomy given the spectrum of support revealed in polls, that they were being used to prioritize among the candidates in the “debates” and more generally in terms of electability is problematic.
Most importantly, a poll is not an election. To relegate some candidates while privileging others (even crowning a “front runner”) ahead of any primary or caucus is without democratic legitimacy because polls have no decision-making authority. In other words, for the media (and “debate” organizers) to rely on polls to discriminate between candidates both in terms of electability and in allotting attention deprives the electorate at the polls or caucuses to break up the pack. Indeed, even aside from the fact that a poll does not constitute an election, relying on polls is problematic.
For one thing, relying on a poll can give the false impression of permanent preferences. Bill McInturff, a Republican pollster who directed the WSJ/NBC poll with Peter Hart in October 2011, remarked, “How quickly candidates have risen and then, like a soufflé, how quickly they’ve fallen back down.” A poll is at best a snapshot, and is thus obsolete even on the next day. Furthermore, the proliferation of cell phones in lieu of LAN lines and of do-not-call lists makes the “science” of polling less exact than even it portends. Indeed, to rely on the telephone in conducting surveys introduces a certain bias. For example, how many homeless people have phones?  Less obviously, how many survey callers get through to corporate executives who have gate-keepers poised to divert such calls?
Even if polling were capable of giving an accurate snapshot, the polls would have to be interpreted correctly. That obvious error can be perpetuated even by a media heavy-weight like The Wall Street Journal should give us all pause in whether we should rely on the reporting of polls. For example, the October 13, 2011 headline reads, “Can Vaults to Lead in Poll.” The WSJ/NBC News telephone poll of Republican primary voters that month put Herman Cain at 27% and Mitt Romney at 23 percent. Unfortunately for the poll and for the headline, the margin of error of the poll is 5.35 percentage points. Now, math is not my strong suit by any means, but the last I checked, 4 (27-23) is less than 5.35. The poll itself does not justify the headline.

Given the margin of error, Romney could claim to be in the lead!  This conclusion too is within the poll’s result. In fact, Romney in the lead is just as valid a conclusion from the poll. So it is indeterminate as to which of the two candidates is in the lead. This why the newspaper's headline is dogmatic. Within a margin of error, no particular result is privileged over any other. To pick out one “result” within the margin of error is dogmatic in the sense of being arbitrary, and yet it is done all the time. Given the graphic above, readers who do not understand statistics and surveying as a  social-scientific method are apt to fixate on the 27% and the 23% as if these figures were engraved in stone.

Moreover, typically people apply a false sense of exactitude when numbers are reported. It is like driving from Pittsburgh to Indianapolis and remarking while passing Youngstown, we will arrive in Indy at 5:45pm. Airline pilots in particular enjoy exercising the error of exaggerated exactitude by announcing the arrival time for the destination even from the departure airport before takeoff. At New York’s Kennedy, a pilot might announce, “we will touchdown in Paris at 6:47a.m. tomorrow morning.” Not 6:48a.m. Not 6:46a.m. Rather, 6:47a.m. on the dot. On your next flight, you might point this error of excessive exactitude out to your pilot (after you have landed—you wouldn’t want to provoke a nervous breakdown before you are back safely on the ground at the appointed time).

Besides the problems in interpreting and reporting particular polls, relying on them before the first primary or caucus is problematic from the standpoint of democracy itself. To the extent that Cain’s 27% “front-runner’s status,” anointed by the October poll more than a year before the presidential election, impacts or detracts from the electoral choices of the primary or caucus voters, the democratic process itself suffers. In other words, introducing error into an electoral process does not bode well for a democratic system or a specific electoral outcome. Moreover, willowing down a field of candidates by polls circumvents a democratic system wherein elections are the means by which decisions are made with respect to candidates for public office. In effect, pollsters, commentators and news editors (and executives) have supplanted, or at least jumped the gun on, the primaries and caucuses. The elongated electoral “season” (measured in years) even relative to the primaries and caucuses has provided the vacuum in which the “early decisions” can be made by (unelected) pollsters, commentators, and journalists. The U.S. presidential election process is broken. Whether anything will be done to fix the process remains to be seen. I’m not holding my breath, given the magnitude of the problem and the headlines. Indeed, saying that the process in the fall of 2011 is democratically illegitimate would be like saying that the emperor is wearing no clothes. Resisting the urge to make a joke at Gov. Christie’s expense (he has said the jokes have to be funny at least—he is indeed a class act), I will rest my case here—hoping that I have adequately reserved my readers’ respect.

 

Source:

Neil King, Jr. and Jonathan Weisman, “Cain Vaults to Lead in Poll,” The Wall Street Journal, October 13, 2011. 

John Kerry: An American Politician

Just after President Barak Obama announced that he would nominate Sen. John Kerry of Massachusetts to be the U.S. Secretary of State, the occupant of the corresponding office in the E.U., Catherine Ashton, welcomed the prospect of working with Kerry.

U.S. President Obama nominates U.S. Sen. John Kerry to be U.S. Secretary of State.    Reuters

"I am delighted by the nomination of Senator John Kerry to succeed Hillary Clinton as US Secretary of State. I have had the privilege of meeting Senator Kerry on a number of occasions. His considerable experience, not least as chair of the Senate Foreign Relations Committee, makes him an ideal candidate for this crucial position. Pending Congressional confirmation, I look forward very much to working closely with him, and continuing the excellent relationship established with Secretary Clinton."
Whether Ashton knew it at the time or not, she would be working with an American politician. After all, Kerry had already run for the American presidency. To be sure, he was not taking up the foreign affairs post to build his resume. I believe he genuinely wanted the job. The problem is, is trying to please all the people all the time, a politician's patina (or deeper?), best in foreign affairs? In this essay, I focus not on this question, but, rather, on the patina itself in the case of John Kerry so the underlying problem behind the question of fit with foreign affairs can be more transparent to the wider public.
I, too, have had the privilege of meeting Senator Kerry. He struck me as a warm yet very ambitious man. At the time, I was on a deficit-reduction kick, so I asked him how his “big government” ideology was consistent with reducing the federal deficit. “I’m a fiscal conservative!” he insisted as he put his arm around my shoulder and smiled. “Oh, come on,” I countered in rather obvious disbelief. “I believe that government programs should be run efficiently,” he explained. “That’s good, but I don’t think that’s fiscal conservativism,” I said, “and it doesn’t necessarily make a dent in the deficit because you could simply add more programs that are efficiently run.” Perhaps Kerry as the U.S. Secretary of State might put his arm on Katherine Ashton’s shoulder and mollify her with something like, “Of course the E.U. is not a federal system,” or “the U.S. is firmly in support of the E.U. and ready to help.” Bill Clinton could even provide background music by playing his sax. Would the European succumb to the “I’m essentially whatever you want me to be”?
I would like to think that at least behind closed doors, politicians are capable of real talk rather than appearance and manipulation. What is the essential nature of a person who would make his or life that of politics? Do we ever really know them? Is there substance under the shells? Moreover, are the best people ruling? Does the democratic process proffer the best or merely the most pleasing appearance? As the E.U. struggles with the appearance of suffering from a democratic deficit, Europeans might want to reflect a bit on whether “technocrats” are really so bad. At least they don’t have quite the skill to conflate themselves into chameleons. Ashton might indeed have had Kerry’s number, yet no one would ever glimpse this from her glowing statement. Are she and Kerry two of a kind—both politicians managing appearances? How would the rest of us ever know? And yet we are the ones who are tasked with pulling the levers on election-day.

Source: E.U. Foreign Minister’s Press Release

How a Chairman of the Federal Reserve Made Strategic Use of the Media

Just as the US Senate was to take up the matter of Ben Bernanke’s re-appointment as Chair of the Federal Reserve in 2010, Time magazine came out with its announcement that he is to be its person of the year.  According to the magazine, “when turbulence in U.S. housing markets metastasized into the worst global financial crisis in more than 75 years, he conjured up trillions of new dollars and blasted them into the economy; engineered massive public rescues of failing private companies; ratcheted down interest rates to zero; lent to mutual funds, hedge funds, foreign banks, investment banks, manufacturers, insurers and other borrowers who had never dreamed of receiving Fed cash; jump-started stalled credit markets in everything from car loans to corporate paper; revolutionized housing finance with a breathtaking shopping spree for mortgage bonds; blew up the Fed’s balance sheet to three times its previous size; and generally transformed the staid arena of central banking into a stage for desperate improvisation. He didn’t just reshape U.S. monetary policy; he led an effort to save the world economy.”  Not to be outdone in service to the Chairman, CNN furnished its own reporters, who gave credit to Bernanke for these measures.  Interestingly, however, even though one reporter admitted that Bernanke had said in 2007 that the subprime market and its derivatives would not threaten the financial market and the banks, she attributed the fault there to the imperfections in the market rather than to Bernanke himself in being wrong.   So, he gets credit for cleaning up the mess (ignoring the foreclosed homeowners) but not the blame for being wrong about the contagion (and not urging regulation of the derivatives).  He could have urged the regulation of derivatives (he is a smart person), and once the crisis occurred, he could have tailored his response to the homeowners facing foreclosures that could have been stopped. For example, the Fed could have created dollars to subsidize the inordinate rates on the variable rate subprime mortgages (i.e. those bank assets would not have been toxic and the banks’ balance sheets would have been fine…two birds with one stone…rather than doing the bidding of one of the parties).  To be sure, if the Fed is inordinately friendly to banks because of the power they have in selecting their regulators (the NY Fed Chair’s appointing committee consists of bankers), then Bernanke might have simply been playing the good politics for staying in office.   “Our ships must all sail in the same direction; otherwise who can tell how long you will…last…with us.” (The Godfather, part III)  Bernanke is a player from the perspective of the real power behind the throne: America’s financial elite.  That elite literally owns the media companies. So what I want to point out here is that the timing of Time’s announcement and the asymetry in CNN’s laudatory coverage of the Chairman just as the Senate was about to consider his re-appointment led me almost instinctually to  be convinced that coincidence was not the driver here.  The Chairman undoubtedly had some powerful friends in the media who were giving him a publicity offensive, or campaign, just in time for the Senate debate on whether to appoint him.

Through all the admiration of this person of 2009, it should be remembered that he did not urge the regulation of sub-prime derivatives issued or held by the banks regulated by the Fed.  He was wrong about the subprime housing bubble being contained.  And he failed to protect homeowners sufficiently.  If the media was being used by the Fed Chair in his re-appointment campaign, it could be that what we are fed by CNN, Fox, MSNBC and the main network newscasts is not really as neutral or beyond their control as we think.   News as a campaign.  News because it is in some powerful actor’s vested interests.  While there is certainly coincidence in life, an alignment such as I have outlined here is far too transparent—or at least it ought to be.

The subtext here is that we, the American people, have become too much the pawns even as we think we are not.  The illusion of popular sovereignty is that we are in control.   I don’t think we have any idea of the extent to which we are manipulated by the powers that transcend our elected representatives and their appointees.  It is no wonder that real change does not get beyond the interests of the real power in America, whose interest is in the status quo or at best in an incremental change.   Essentially, we have allowed the anti-democratic power to concentrate to a degree that is dangerous to a functioning republic (i.e., a representative democracy).  We should not be surprised to find that powerful actors are operating at a subterranean level where transparency is intentionally lacking.    How do we get it back, you ask?  Hah!   We would have to see it first—realize its extent and depth—and I’m not holding my breath that enough people will wake up to see the light.

Too many of us are ensconced in Plato’s cave, taking what the puppets say for reality.  As Jack Nicholson said in A Few Good Men, “You want answers? YOU CAN’T HANDLE THE TRUTH!”    Even if we could stomach the emetic manipulation behind the scenes that is directed to us (and even our representatives—when they aren’t doing it themselves), we would have to be able to see it—and it is so well hidden.  We can only grasp at straws…confluences that seem like more than coincidences.  As a member of the black caucus of the US House (surprisingly) said to a reporter of Frontline on the TARP program passing the House just days after it had been voted down by that same body, “You have no idea how powerful the anti-democratic forces are here.”    You and I get only glimpses.  The puppets seem more real so we believe in them.   Please don’t take my thesis to be that there is one huge orchastrated conspiracy; rather, I’m simply suggesting that our system of representative democracy does not seem to be able to sufficiently constrain the invisible powers that are pulling strings without being accountable to the public power.  It is my ardent hope that the people will look beyond the status quo in voting for candidates—perhaps getting back to citizen representatives who do their duty then return to their preferred occupations—that we would elect people sufficiently principled and not desirous of a life in power to be willing to take on the financial power.   Do I think it will happen?  Sadly, no.  I’m sorry, but I just don’t think we have it in us…or we don’t have enough of what it would take to confront that which is in us that favors comfort and sleep.   In the story of the rise and fall of empires, the United States is not exempt.  The culprit, as with most things, lies within.   It is ultimately about what kind of people too many of us are.  Such a thing is very, very difficult to change, let alone see.  Decadence tends to be invisible to itself.

Note: A day after CNN covered the announcement, the Senate finance committee debated and voted on Bernanke’s re-appointment. See http://www.msnbc.msn.com/id/34463144/ns/business-stocks_and_economy/

 Source: http://www.time.com/time/specials/packages/article/0,28804,1946375_1947251,00.html#ixzz0Zs8WgpV1

Obama's Meeting with Culpable Top Bankers

When he was running for US President, Barak Obama said that the financial crisis provided an opportunity for financial system reform beyond that which is in the interest of the big banks because the power of the latter is temporarily eclipsed and the US Government can take advantage of that.  His assumption is that during normal times, the banking industry essentially owns the Congress (Sen Dick Durbin’s statement just after the banking lobby defeated a foreclosure bill in the US Senate in 2009).  Sadly, the government did not use the eclipse; rather, it has been using the appearance of power and direction in the relumed post-crisis period to engage in window-dressing to assuage populist anger at the banks.

 Asserting that it “is among the strongest banks in the industry,” Citigroup announced in December, 2009 that it would soon repay $20 billion of federal bailout money. This from a bank that was in the red for most of the preceding two years, that was expected to limp through 2010 amid a torrent of loan losses, that saw its stock price close after the announcement at a measly $3.70 a share — and that, like other big banks, was still reluctant to lend. Citigroup’s planned exit from the bailout — like Bank of America’s earlier this month — would be welcome if the banks were the picture of health. But their main motive was to get out from under the bailout’s pay caps and other restraints. Perhaps the bankers were motivated to attract talent;  perhaps they were acting in their personal financial interests.  The Treasury Department’s approval was a grim reminder of the political power of the banks, even as the economy they did so much to damage continued at the time to struggle and the banks have benefited from taxpayer money.

Big bank profits, for instance, still came mostly courtesy of taxpayers. Their trading earnings were financed by more than a trillion dollars’ worth of cheap loans from the Federal Reserve, for which some of their most noxious assets were collateral. They benefitted from immense federal loan guarantees, but they were not lending much. Lending to business, notably, was very tight.  Barak Obama’s “urging” the banks to lend more to small business was not apt to be taken seriously by the big banks, given their financial power.   To exort banks to be good “corporate citizens” is only to twist “citzen” beyond its pale.

Let’s be clear. Organizations are not citizens.  For one thing, they can’t vote.  Exxon can’t mail in its ballot for president.  Nor can it be drafted to fight (rather, it can receive military contracts; its lobby knows how to procure those).  Moreover, they are designed (real citizens are not “designed”) to retain income without limit.  Extrinsic normative claims on the organizational machines do not register in the corporate calculus unless there is a financial cost.

Being called to the “woodshed” at a White House meeting is mere political theatre—something the bankers who bothered to attend in person must have known was something merely to sit through.  Some of the biggest recipients of taxpayers’ money, including Citigroup and Goldman Sachs, didn’t even bother making the extra effort to get there ahead of time to avoid the predictable winter weather that grounded their flights.  The acela train from NYC was running on time, yet the CEOs cited flight delays as making it impossible for them to attend in person.  Perhaps the CEOs correctly determined that Barak Obama’s meeting was mere political theatre.  The banking lobby was surely not being distracted from the financial reform legislation making its way through Congress.  That lobby has gained significant loopholes in the House’s passed bill (see my post on the House bill).  Aside from the loopholes (such as derivatives still not subject to regulation!), the apparently “strong” provisions of that bill are vulnerable to being gamed. The Senate, which is unlikely to pass its version of the deal until next year, should explore more direct measures, like banning banks beyond a certain size, measured by their liabilities. If we have learned anything over the last couple of years, it is that banks that are too big to fail pose too much of a risk to the economy. Any serious effort to reform the financial system must ensure that no such banks exist.  But can you imagine our elected officials having the guts to split up Goldman Sachs?  Can you imagine what that bank would do to avoid such a fate?  … and yet such private power is not a threat to a republic?   As voters, we are asleep at the wheel, too easily taken in by the theatrics of impotent politicians.

In general terms, it is ironic that the banks too big to fail may be even more of a risk after the financial crisis.  What profits the banks have been making have come mostly from trading. Many big banks were happy to depend on the lifeline from the Fed and hang onto their toxic assets hoping for a rebound in prices.  Crucially in terms of the systemic risk in “too big to fail,” the whole system has grown more concentrated since the crisis. Bank of America was considered too big to fail before the meltdown. Since then, it has acquired Merrill Lynch. Wells Fargo took over Wachovia. And JPMorgan Chase gobbled up Bear Stearns.  If the goal is to reduce the number of huge banks that taxpayers must rescue at any cost, the US Goverment has been moving in the wrong direction. The growth of the biggest banks ensures that the next bailout will have to be even bigger. These banks will be more likely to take on excessive risk because they have the implicit assurance of rescue.  In short, there is even more systemic risk after the financial crisis of 2008.  Creating a new consumer protection agency is a feckless attempt by the US Government to show some muscle to face entrenched (and even more powerful) financial interests on Wall St.  Even giving the government the power to deal with banks deemed too risky to the financial market itself does not guarantee that the power will be used.  Consider, for example, the lack of enforcement of anti-trust law.  For a comparison, look at the EU—not only in terms of going after big companies like Microsoft, but big banker bonuses.   In the US, we much face the fact that the big banks are on top.  If what is good for Goldman Sachs or Citigroup is not necessarily good for us, the American people, then there is a tremendous systemic risk for us in being appeased by Barak Obama’s public “scolding” of Wall Street and by the Swiss-cheeze financial reform bill making its way through Congress.  Neither branch is taking seriously the question of the existence itself of the banks too big to fail.  Moreover, the question of whether large concentrations of private power have become a threat to our republic—on account not only of the ability of a big bank to shaft its customers, but also of the relative power of the banks and their lobby over our government—has effectively been sidelined.   It as as though popular sovereignty here means charting a ship’s course without looking beyond the bow.   Some of the wealthy passenagers have told us: don’t look out there!  Don’t ask the real questions!  And we, being reduced to unconscious herd animals, happily comply and stiffle our anguish because we feel the big banks have already won.

Source: http://www.nytimes.com/2009/12/15/opinion/15tue1.html

On the Presumptuousness of Power: Does Wall Street Own Congress?

At the end of April, 2009, U.S. Senator Richard Durbin blamed the powerful banking lobby for the defeat of legislation that would have allowed bankruptcy judges to modify some troubled mortgages.  Even as mortgage servers were claiming to be overwhelmed with requests from distressed borrowers for readjustments to the adjustable-rate mortgages (ARM), the banks and mortgage companies felt the need to stop the US Senate from enabling judges to relieve the backlog. Durban later said in an interview, “And the banks — hard to believe in a time when we’re facing a banking crisis that many of the banks created — are still the most powerful lobby on Capitol Hill. And they frankly own the place,” he said on WJJG 1530 AM radio's  “Mornings with Ray Hanania.” On October 30, 2009,  James K. Galbraith spoke on the Bill Moyers Journal on the bank lobby changing the financial system regulation reforms now being discussed in Congress.  That that lobby feels itself to be in a position to advise the Congress on a matter in which the banks were part of the problem is something that blows Galbraith away.   They should realize among themselves, or at the very least BE TOLD that their involvement is not helpful or appropriate.   Galbraith pointed out that we have a pretty good idea of what needs to be done governmentally to stave off another financial crisis—such as separating the commerical banking and investment trading (on the bank’s equity even!) functions and reducing the scale of the banks too big to fail.  However, there are a hundred reasons why the governing class will not follow through. 

For one, we can look back to Durbin’s comment that the banking lobby owns Congress.   The conflict of interest in the owner of Congress keeping Congress from legislating on the industry is a suffiicent basis for worry; that the lobby presumes itself to be in a position to advise or pressure on banking regulatory reform and that the lobby still has the muscle to see that it is still invited to the table strikes me as emetic.  It shows the arrogance of the corporate world and the corruption of the governing class.   The housing bubble and sub-prime mortgages were in the interest of both, and yet reform strangely is not.   I would add that any voter who goes on, business as usual, in voting for an incombant is contributing to the perpetuation of the  squalid system that we are now enjoying.

Imagine, just for a moment, that a friend or neighbor insults you.  You invite some other friends over to figure out how to deal with that friend or neighbor.  You are shocked when he or she walks in your front doorway (no need to hide) and sits down in your living room with the others.  Not only that, he or she presumes to advise the group, adding pressure or outright threats that the group had better come up with something that is good for him or her. Here’s what I’m getting at: focus for a moment on the attitude of the friend or neighbor.  In our normal interpersonal relations, we would rationally conclude that the person is delusional and excessively self-absorbed.  We tend to let positions or organizations keep us from viewing their people as other (flawed) human beings.   Arrogance built on presumption concerning a matter on which the person has screwed up and others are hurt  is or ought to be a huge red flag for the rest of us (and our representatives!).   I find this attitude to be far more difficult to understand and accept than the fact that industry lobbies have an inordinate amount of power in Washington. 

I find myself thinking about the nature of presumption that can manifest as an illness where it is beyond the pale. That the person involved probably doesn’t even see this suggests to me that a rather dysfunctional lot has congregated in the upper rafters of American banking.   What kind of a person pushes for his or her advantage in the efforts by others to clean up one’s mess?   That they are allowed in the room is alone a sad testament; that our representatives are actually succumbing to them is sordid indeed.   Of course, it is in the interest of big business that the political power be concentrated among the governing class in Washington.   We are mere bystanders as the dance unfolds. 

See related: Essays on the Financial Crisis

Sources:

http://www.politico.com/news/stories/0409/21962.html
http://www.huffingtonpost.com/2009/04/29/dick-durbin-banks-frankly_n_193010.html
http://www.huffingtonpost.com/2009/04/29/dick-durbin-banks-frankly_n_193010.html  (“own the place” quote)
http://www.pbs.org/moyers/journal/10302009/profile.html