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.

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).

President Obama at a fundraiser for Patty Murray:

They spent almost a decade driving the economy into a ditch. I mean, think about it, if this — if the economy was a car and they drove it into the ditch. (Laughter.) And so me and Patty, and a bunch of others, we go down there and we put on our boots and we’re pushing and shoving. And it’s muddy and there are bugs and we’re sweating — (laughter) — and shoving, pushing hard. And they’re all standing there sipping Slurpees — (laughter) — and watching and — “you’re not pushing hard enough.” “That’s not the right way to push.” (Pretends to sip a Slurpee.) (Laughter and applause.)

So finally, finally, Patty and I and everybody, we finally get the car up on level ground. We’re about to go forward. And these guys come and tap us on the shoulder, and they say, “We want the keys back.” (Laughter.)

You can’t have the keys back. You don’t know how to drive. (Applause.) You don’t know how to drive. (Applause.) You can’t have them back. (Applause.) Can’t have them back. You can’t have them back. We are trying to go forward. We do not want to go backwards — into the ditch again.

You notice, when you want to move forward in your car, what do you do? You put your car in “D.” (Applause.) When you want to go backwards, you put it in “R” — (applause) — back into the ditch. Keep that in mind in November. (Applause.) That’s not a coincidence. (Laughter.)

And Ezra Klein’s response:

Maybe I’m just breathing too much of The Washington Post’s air, but that last bit bugs me. The driving analogy? Fine. It’s a colorful way of making a fair point about Republican mismanagement of the economy. But that bit about “D” and “R”? It doesn’t feel presidential. It’s more like the sort of joke that your liberal grandmother would forward you. It’s lame.

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.

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.

As an addendum to last night’s post on David Brooks misguided op-ed, Ezra Klein and Ryan Avent point out that contrary to this sentiment:

Now, it may be that the deficit itself scares people even as the deficit-driven economic recovery is making them confident. But that just goes to the question of whether you’d prefer to have people worried about a deficit that’s actually not a major problem or an unnecessarily deep recession that actually is a major problem.