China and its Discontents

On the eve of SCOTUS potentially overturning the individual mandate portion of the ACA, Ezra Klein reacts to the sadness and resignation at the political polarization of the court coming from liberal legal scholars by saying: “Of course the Supreme Court is political!” Last fall I wrote a paper on the various civil rights cases basically saying that this is not just a modern phenomenon, but one that’s been around as long as the court has existed (or perhaps shortly after McCulloch v. Maryland), and that shifting interpretations of the Constitution are perhaps not such a bad thing given the shifting moral ground of society (EDIT: I should note that I do NOT support the overturn of the individual mandate). At the time I was very nervous about ever writing or publishing something like this, but I guess it’s become a common-place sentiment now! Read on:

Justice cannot be blind to morality; ultimately all decisions made by courts amount to moral judgments. This seems to run contrary to the most conservative notion of the law: fixed and unbreakable, to be treated only as the words exactly prescribe and in the exact intention of those who wrote it. But this belies the fact that we have progressed morally. To say that we have progressed morally is, I think, clear. One hundred and fifty years ago, it was acceptable for Justice Taney to declare: “He was bought and sold, and treated as an ordinary article of merchandise and traffic, whenever a profit could be made by it. This opinion was at that time fixed and universal in the civilized portion of the white race. It was regarded as an axiom in morals as well as in politics…” (6) In Dred Scott, Justice Taney’s conclusion that blacks cannot become citizens is grounded on a purely moral basis. The appeals to tradition and precedent are beside the point. If Taney had disagreed with this evaluation of all blacks, then he would have reasoned that since blacks were human after all, they deserved the rights and protections of the Constitution. Taney contorts himself trying to explain the Declaration of Independence: “The general words above quoted would seem to embrace the whole human family…But it is too clear for dispute, that the enslaved African race were not intended to be included and formed no part of the people who framed and adopted this declaration; for if the language, as understood in that day, would embrace them, the conduct of the distinguished men who framed the Declaration of Independence would have been utterly and flagrantly inconsistent with the principles they asserted; and instead of the sympathy of mankind, to which they so confidently appealed, they would have deserved and received universal rebuke and reprobation.” (9) The founders would have been hypocritical if they simultaneously owned slaves and at the same time declared those slaves were free human beings? Why yes, they were hypocritical! There is no way Taney can come to this conclusion unless he makes a prior moral judgment that blacks are inferior. In this case, the language is unambiguous and clear, as Taney acknowledges in the first sentence.

The Court in the Civil Rights Cases and Plessy v. Ferguson did the exact same thing, but in reverse. The Court in these cases use the 13^th and 14^th amendments to institutionalize racism and discrimination in this country, contra to the obvious intentions of those who passed those amendments. When it passed those amendments, Congress specifically gave itself “power to enforce, by appropriate legislation, the provisions” of the two amendments. And it did enforce those provisions! It passed civil rights laws that guaranteed equality in the use of public accommodations; it directed the army to occupy the South, enforcing political and social equality and voting rights for blacks; it established the Freedmen’s Bureau to provide emergency assistance to former slaves, public schooling for black children, and found what we now refer to as historically black colleges and universities with the hope that the social inequality that former slaves and their descendants faced could be eradicated.

But the Court in the Civil Rights Cases and Plessy v. Ferguson made a predetermined moral judgment, and conformed their legal reasoning to fit that judgment. In the Civil Rights Cases, Justice Bradley seems to believe that “There were thousands of free colored people in this country before the abolition of slavery, enjoying all the essential rights of life, liberty and property the same as white citizens…” (45) How can Bradley believe this in 1883, when surely he has read Justice Taney’s Dred Scott decision, written only twenty-five years prior? It certainly is not any close reading of precedent when Bradley decides to use this “fact” to support his argument that private discrimination should remain untouched by federal legislation.

Bradley later asks: “If it is supposable that the States may deprive persons of life, liberty, and property without due process of law…why should not Congress proceed at once to prescribe due process of law for the protection of every one of these fundamental rights…?” (36) And yet this alternative is exactly what happened when, in a series of decisions, the Court incorporated the Bill of Rights and applied it to the States! The Court in later decades simply made a different moral determination than Bradley did and used the Constitution to support that determination.

And the same thing happened when the Court ruled in direct opposition to the Civil Rights Cases in Jones v. Alfred H. Mayer Co. without explicitly overturning the earlier precedent. There is little difference in the facts of the two cases, and no difference in the legal issues presented! In the Civil Rights Cases, the Court denied that private discrimination constituted a badge of slavery per the 13^th amendment. In Jones v. Alfred Mayer, the Court did. The Court in every one of these cases interpreted the Constitution according to their individual ethical codes and contemporary public morality. How else can you explain the radical swings in Constitutional law, from Reconstruction, Segregation, and Civil Rights eras? Morality dictates law.

Nothing could illustrate this case further than the Court’s opinion in Plessy. I need only reference one overriding, and controlling fact to make my point. In the Civil Rights Cases, Bradley specifically stated that the 14^th amendment, “nullifies and makes void all State legislation, and State action of every kind, which impairs the privileges and immunities of citizens of the United States, or which injures them in life, liberty or property without due process of law, or which denies to any of them the equal protection of the laws.” (33) And yet Justice Brown in Plessy directly violates this ruling. Bradley meant that the 14^th amendment made unconstitutional exactly the same State-authorized Jim Crow segregation laws that Brown accepts as constitutional.

Any claim that the Court has always, and should always, retain a strict constructionist interpretation of the Constitution is a farce. We have progressed morally. Our interpretation of the Constitution has evolved dramatically over time. We haven’t maintained an Originalist interpretation according to the “Founders intent” (whatever that is), and we shouldn’t.

In Dred Scott, Taney derides: “No one, we presume, supposes that any change in public opinion or feeling, in relation to this unfortunate race, in the civilized nations of Europe or in this country, should induce the court to give to the words of the Constitutions a more liberal construction in their favor than they were intended to bear when the instrument was framed and adopted.” (24) But practically speaking, this is exactly what we have done. As we as a people have interacted with one another and discovered that we are human beings and citizens deserving of equal rights, we have changed our interpretation of the Constitution to fit the times. This is appropriate. Law is a codification of common morality. Any interpretation that insists we adhere to a puritanical eighteenth-century version of morality is wrong.

GEORGE WILL’s Sunday column calls the Supreme Court health-reform case (three days of oral arguments begin Monday) “the last exit ramp on the road to unlimited government”: “[T]he Institute for Justice, a libertarian public interest law firm, [argues that the] individual mandate is incompatible with centuries of contract law … because a compulsory contract is an oxymoron. … Under Obamacare, Congress asserted the improper power to compel commercial contracts.”

Libertarians may believe a compulsory contract is an oxymoron, but everyone is entered into all sorts of “compulsory contracts” by the virtue of being a citizen! Just by being born in the U.S., we are all compelled to pay taxes, abide by the criminal and civil legal codes, and sign ourselves up for Selective Service and possibly be drafted (if we are male), among other requirements that I am most certainly forgetting. Many political philosophers would also consider voting to be each citizen’s duty, and many countries make voting legally obligatory. Of course we wouldn’t even be having this argument if either single-payer insurance had been enacted or hospitals themselves had been socialized, making the individual mandate unnecessary. Those alternatives definitely would not have invited any legal challenges. At least, I don’t think so…

Via Friday’s Playbook

This is why I’m going into graduate school for IR/China Studies/International Economics and where I see my career going into the future. This question of scientistic economics vs. moral and political economy has profound implications for China, where these questions cannot even really be asked by academics. And it of course also directly affects the United States, where we need this kind of thought to combat a growing culture of ignorance and Tea Party economics. I love Michael Sandel:

“Scientistic understandings of economics detached from traditional normative questions, traditional questions of value, has a kind of momentum of its own, as if economics were a science or discipline that had graduated from, risen above, connection with mere speculation, which is what philosophers are sometimes thought to do.

And there is something very heady about that idea, of economics as a science, even like physics, for example. But I think it’s a mistake, and I think it’s short-sighted. I think the most important and creative work in the social sciences in our lifetime and in the future will be done by people who are equipped with economic training and concepts and categories but who can see beyond it, and who can reconnect economics with what used to be called moral and political economy.

You know back in the days of Adam Smith, and David Hume, and John Stewart Mill, there was one subject, moral and political economy. There was not political philosophy on the one hand and economics, the science, on the other. And I think that some of the most exciting development and new work will consist in reconnecting the normative dimensions of moral and political theory with economic analysis.

And we see this beginning in debates about globalization, for example, where the role of markets and normative questions seem very hard to leave by the wayside. So that’s one area I think in which the established social science are in need of a kind of leavening and deepening that can come if they reconnect with questions not only of policy but also values and norms, and ideals.”

via the excellent blog Understanding Society.

This op/ed in the New York Times written by Reagan’s OMB director and former Republican congressman David Stockman is the best piece of writing I have read about the deficit in the past year. And Stockman even manages to be bipartisan in his criticism of the various deficit plans! It’s common knowledge at this point that Rep. Ryan’s budget makes the deficit worse immediately by extending the Bush tax cuts and not doing anything with Medicare until the 2020’s; furthermore he focuses on cost-shifting and raising the burden on seniors and the poor and not on actually making the delivery of healthcare cheaper. But what Stockman reintroduces to the debate is that the Obama budget has its own problems – it is too timid and doesn’t call for any shared sacrifice from the middle class in the form of raised taxes.

This is the liberal argument we have been missing. But it’s also a realistic argument that states the obvious. The deficit debate has measurably shifted to the right – first, the Simpson-Bowles Deficit Commission was supposed to be the centrist plan, the compromise. Then the Republican Study Group’s budget was labeled conservative, the Ryan plan was labeled ‘serious’ and moderately conservative, and the Obama plan came out to the right of the Deficit Commission. Viola – a new middle, seriously shifted to the right.

There seems to be two methods of leading and bargaining in a political context – first, “The American President”-Michael Douglas style, where a leader articulates his preferred outcome, negotiates and compromises. Or, the second, where a leader releases a bargaining position that is designed to appeal to the other side, already compromised from the ideal. The President embraced the second tactic from the get-go, and he’s received a lot of flak from the Left and the media for doing so. Personally, I’m torn – I’m sure the success of tactic #1 is idealized, where the perfect outcome only exists in movies, like “The American President.” At the same time, I think the country needs presidential leadership with an aspirational vision. I don’t see that vision articulated in the Obama White House. I see: “We’re cutting less spending than the other guy.”

So does the White House need more David Stockmans in the White House – and a more liberal-sounding president? Do we need more people like Jared Bernstein, Biden’s economic advisor who just resigned to join the Center on Budget and Policy Priorities? I’d like to think so, if only because I still believe policy is ultimately an extension of the values we hold as a country. And would that mindset cause negotiations to grind to a halt, and lose on every priority the president has? Ideological conviction doesn’t seem to have stopped the Republicans from winning the debate.

Around the country, many teachers see demands to cut their income, benefits and say in how schools are run through collective bargaining as attacks not just on their livelihoods, but on their value to society.

This great New York Times article gets to the heart of the matter: breaking the backs of public sector unions inherently entails vilifying teachers and everyone else who enters public service as ‘leeches’ and the like. Ironically, this also comes at a time when more young people than ever are entering into public service. People decry poor results in education and yet don’t realize that attracting better teachers means that we have to raise the status of teachers in society and pay them more. There’s a reason why Teach for America is effective at getting college students to commit to the job for a few years, but isn’t as effective in recruiting life-long teachers.

This isn’t just true in education; it’s true across the public sector. We wonder why the SEC isn’t doing its job effectively and then forget that the GOP is cutting its budget, which just sends more quality public service employees into the much higher-paying financial industry.

With the release of the Treasury Department’s new white paper on housing policy, the administration has restarted a national discussion on reforming the GSEs (government-sponsored enterprises, Freddy Mac and Fannie Mae). The long and short of it is that they distort the market for mortgages, and contributed to the collapse of the economy by backing risky mortgage securities that later blew up. (they are not however the root cause and creators of those exotic securities; you can thank Wall Street for that) Our bailout of Freddy and Fannie has cost the government far more money than the stimulus or TARP ever cost. This entire set-up is rather strange, given that these are for-profit corporations with an arsenal of lobbyists.

What’s the government’s plan? I got curious when I read Ezra Klein write this bit: “But the government isn’t looking to dramatically change the role they play in the housing market. They’re just looking to get away from poorly designed institutions like Fannie and Freddie.” This seems like a contradiction – and I think he misread the report, although I agree with everything else he wrote in that post. The government’s stake in the mortgage market is going to be substantially altered. As Daniel Indiviglio writes, the government will still subsidize a small portion of mortgages for the poor and veterans through FHA and VA programs, but under any of the options provided by the Treasury Department, the U.S. government will gradually exit the 85% percent of the market it had previously inhabited.

The plan makes GSEs less and less competitive with private sources of funding, gradually winding down its influence on the mortgage market. Fees guaranteeing mortgages will rise, more private capital would need to be raised to cover credit losses, and larger mortgages will not qualify for government-backing. Next, the plan offers three options for a limited government presence on the market: completely private, no government role of any kind; a crisis funding mechanism that is so expensive that during good times it is never used, and in bad times much cheaper to ease a credit crunch; and a catastrophic guarantee reinsurance program. Indiviglio describes this better than I can: “Mortgages would pay a premium to obtain this insurance, but the first losses (up to some specified percentage) would hit whoever held the mortgage asset, whether it be a bank or investor. If losses exceed that first loss piece, then the government would cover the remainder. The government would use the guarantee fees it obtained to do so. That way, theoretically, taxpayers would not be harmed. Think of this as a little like depository insurance, where there’s a fund in place paid for by insurance premiums that the government uses to cover losses.”

This is all good. When it comes to housing policy, one major question will shape how you view all related policies: is universal housing ownership a worthy goal of U.S. government policy? I would say: not in of itself. Owning a house is not a smart decision for every single person. It might be the American dream, but we do more harm than good when we try to force it on people. I would suggest everyone also take a look at the GSE section of the Roosevelt Institute’s 2009 report on financial reform, “Let Markets Be Markets”. There’s a very good lecture from Raj Date included. The full report is here (pdf).

This is a joke:

“The last time Republicans gained control of the House, in 1994, they achieved more in the first 100 days than some Congresses have in two years. From welfare reform to tax cuts to a balanced budget amendment, they passed every one of their 10 ‘Contract With America’ items. … Once again, Republicans cannot be timid. American voters overwhelmingly support spending cuts to balance the budget; six in 10 of them support a 21 percent across-the-board cut in nonmilitary discretionary spending.”

Reality check: the 111th Congress, as in this Congress (yes, the one where Democrats have been in power), has been one of the most productive in history, on par with congress during the early years of both LBJ and FDR. Luntz cites: “welfare reform to tax cuts to a balanced budget amendment” as examples of Republican productivity 15 years ago. The problem is: everyone loves a tax cut. Everyone loves to cut welfare for Cadillac mommies. And the balanced budget amendment never passed the Senate. And then they shut down government over the deficit. So much for that: we got rid of the deficit by the end of the decade anyway, mostly because of a booming economy.

There are no natural constituencies against for what the Republicans are for. The poor on welfare don’t have a voice in government, but business does. While there might exist policy analysts who think certain tax cuts are bad for our budgets, there’s no constituency who is going to refuse one. Many Democratic priorities, however, require a gentler finesse in order to get passed. In other words, there are vested interests who will lose money if Congress acts for the greater good. It requires some politicking to persuade these vested interests, and that’s hard.

Here are some things the 111th Congress has accomplished: stimulus, which in itself represents a dramatic investment in infrastructure, schools, and a tax cut all rolled into one; healthcare reform, which could be split up into numerous major bills, such as closing the Medicare doughnut hole, providing coverage to 40 million Americans, requiring pre-existing conditions to be covered, allowing kids to stay on their parents’ plans until age 26, making sure all children have health insurance, and reducing the rise in the growth of healthcare spending; financial regulatory reform, which both forms a consumer protection agency to ward against faulty financial products that will explode in consumers’ faces, and derivatives that will likewise explode in bankers’ faces; Ted Kennedy’s final legacy, the SERVE America Act, which dramatically expands the number of young people serving in AmeriCorps and creates a ‘Social Innovation Fund’, which funds evidence-based programs with private and foundational support in pursuit of solving major social challenges; tobacco-regulation legislation; credit-card legislation, which establishes a credit-card bill of rights and bans arbitrary interest rate increases; fully funding and expanding the Veterans Administration; the Lilly Ledbetter Fair Pay Act (for all the ladies out there); fully funding the Violence Against Women Act (again, for the ladies); student loan reform and increased access to Pell Grants; Promise Neighborhood legislation (one of my favorite, and under-exposed in the entire bunch); cracking down on mortgage fraud; and more jobs legislation than I can count, including the Advanced Manufacturing Fund for innovative manufacturing strategies, expanded loan programs in the Small Business Administration, Energy Partnership for the Americas, creating markets overseas for our clean-energy industries, fully funding the Community Development Block Grant, job-training programs for clean energy technologies, and of course, everything already in the Stimulus Act.

Whew. That was a lot. And it makes Frank Luntz argument look ridiculous. Luntz says the Democrats loss is not about “deficient personalities or insufficient communication,” but about wrong priorities. I’m sorry, but Democrats promised this exact agenda when they were elected, and they delivered.

Luntz’s policy suggestions are likewise inane:

(1) Balance the budget as quickly as possible through meaningful spending reductions, a hard spending cap and a constitutional amendment so that it never gets unbalanced again.

(2) Eliminate all earmarks until the budget is balanced, then require a two-thirds vote by Congress for future earmark legislation.

(3) Keep taxes down by requiring supermajorities for increases, and eventually enact tax reform with a simple, low, fair rate that drastically reduces the length of the IRS code.

(4) Create a blue-ribbon task force that engages in a complete, line-by-line forensic audit of federal agencies and programs to end waste and reduce red tape and bureaucracy.

(5) And require Congress to provide specific constitutional authorization for every bill it passes so that the government stays within the boundaries imagined by the founders.

1) Spending reductions won’t get the job done without reductions in the rate of spending growth, especially in the medical sector, while a spending cap is unwieldy and not specific enough; 2) earmarks comprise a pitifully small portion of the annual deficit; 3) supermajority-requirements for tax increases have ruined California’s budget outlook and are a bad idea, while a “simple, low, fair rate” (i.e. the flat tax) is regressive and rewards the rich while punishing the poor; 4) a line-by-line audit of the budget is already being done – there’s already a non-military discretionary spending freeze; 5) who decides what’s acceptable in the eyes of the Constitution? Some wackos think the Constitution was written by Moses. I think this is the job of the Supreme Court, a job it has successfully carried out since Marbury v. Madison.

Ultimately, collective political behavior can seem irrational. Democrats ran on a specific platform, got elected in historic numbers, passed most of their platform, and then got dumped in historic numbers. But really, it’s just the floundering economy, and the Federal Government’s inability to fix a massive sink-hole in demand (now if this were the Reagan recession, which was actually created by the Fed and interest rates were raised to break stratospheric inflation in the late 70’s, it would be a lot easier to fix – just lower interest rates). What do I take from all of this? The Democrats’ loss has to do with anything but their policy accomplishments, and the political winds during a massive recession can switch on a dime.

You cannot construct a coherent policy model for the Republican Party’s policies over the past two years…

From Ezra Klein. Find me a coherent Republican platform and I’ll show you Sarah Palin’s gay, San Franciscan fans. Who are also simultaneously socialist.

Here’s an idea, of which I was reminded of in the Brookings Institution’s “Export Nation” report: a National Infrastructure Bank. These days it seems the only way Congress is able to act is when it spins off its powers to another institution (re: the Independent Medicare Advisory Committee, or IMAC). Regardless, I would look forward to an infrastructure bank. Instead of re-appropriating funds every year, which could be discouraged in times like these, an infrastructure bank could be more nimble and light on its feet. This is a useful quality when one considers the vast demand for infrastructure investment.

One of Ezra Klein’s blog posts today reminded me to write a little note clarifying an earlier post – “Rebuilding America”. That post was more of a broad overview on the inability of the federal government to enact any further fiscal or monetary stimulus. I argued that President Obama needs to make an unequivocal case for ‘rebuilding America’ with the type of “Grand American projects” associated with the strategic visions proposed by Steve Clemons and James Fallows.

What I was unclear about was what the term “Grand American projects” meant. My working definition now is long-term fiscal policy designed to quantitatively improve the working class’ quality of life and productivity, and to reduce the income gap. In short order, to revitalize the social mobility that was characterized by the 90’s. This is a broad definition – it includes investments in renewable energy, transportation networks, urban renewal and planning, other infrastructure, and education (this list is by no means exhaustive). These policies need to be passed now and take effect over the next several decades, rather than serve as a reactionary measure a la the 2009 stimulus.

What about what has already been signed into law? I view financial reform as a necessity, but not a Grand American project; it’s mainly a reactive measure. Part of health-care reform would qualify – R & D, IT investment. The rest of the bill is absolutely vital in improving quality of life and productivity, but is not intended to radically improve social mobility. Finally, tax-code reform (this calculator from CEPR is useful – I would add more income levels in the tax code and tax the top marginal rate higher) is necessary to fund these investments and reduce our debt obligations.

The US has been wracked for the past decade with what Ed Luce calls “the Great Stagnation”. Real income has decreased, and we’ve let our regulatory system grow dysfunctional from disuse and our infrastructure system decrepit from under-investment. We’re also competing with foreign industries to accomplish the same goals. I don’t believe foreign growth is bad – on the contrary, Chinese growth opens up Chinese markets to our goods and services. But I do think that US stagnation is bad. We vitally need a positive vision of a more equitable America. I don’t use the word ‘vision’ lightly. It can’t be anything less than a ‘vision’. Anything less would be disastrous.