Relevant and even prescient commentary on news, politics and the economy.

Letter from an angry reader

From Stormy, who has written on global trade for over a decade, sends an e-mail on the discovery that we are losing competitive advantage:

I find it absolutely stunning that the Yves post and MIT study below is considered big news. Four or five years ago, I saw the writing on the wall. Off-shoring, outsourcing…name of the game. All the blather about new technology was just that: blather—otherwise, how do we explain China? It uses cheap labor …as does Vietnam, Mexico…on and on. Apple and IBM are the poster children of the modus operandi. They are American companies in name only.

Eventually, I just gave up singing the song. All the big economic voices have their selling  of corporate profit…. Globalization—poorly designed for all us schmucks. It was designed for the rich….end of story.

WTO rules? Ok: Last time. China played that WTO game by stiffing its own companies to lure the multi-corporations to set up house on Chinese soil. Chinese firms were taxed at twice the rate of foreign firms. Non-existent environmental standards in China, which lowered the cost of doing business. Unions? None. Lowered the cost of doing business. Cheap, slave labor. I could continue…but what is the use? And of course: monetary manipulation. Make cheap in China—sell high in the West. Where were the big economic voices?

And what did the U.S. do? Worry about the consumer stepping up to the plate!—banks charged uxorious rates for credit cards and loans. Extending risky credit was the name of the game. Get every last penny from the American consumer.

Sorry to get so annoyed. I saw all the stupid arguments…they were dodges. Clinton gave Phil Gramm a big wet kiss –and signed the Financial Modernization Act of 1999. Then he told us NAFTA was a win-win…. create jobs at home. Yup Yup. Then Clinton joined the lobbyist crowd and made his millions. Now we have Obama his loves the big CEO`s—

Obama’s efforts to stem outsourcing/offshoring have been silly. Obama’s solution? Cut taxes on corporations to keep them here. China gave tax free ten-year holidays to many corporations. O think he is going to match that? His strategy is classic economic stupidity…a knee jerk solution. And will O match the cheap labor costs? Will he match the low environmental standards? Will he call a halt to monetary manipulation? I suggest, play Name the Corporation who hates American. Name the corporations and the CEO who have shipped jobs overseas—only to send the goods back home.

Shame them. Make it difficult for them. Put a tariff on all goods made abroad by American companies—and exported here. Revisit the idea of what a corporate charter means. Take it away from corporations who consistently stiff us.

Close down tax havens. Get serious about them. Christ, if we think Iraq and Iran are problems….what about Bermuda? Close it down. I am serious. Send in the marines. If we cannot think of ways of really hurting Bermuda and similar uglies….we do not have a country interested in defending itself.
And change the rules of the WTO: Countries must have environment and labor standards. Countries cannot have a two-tiered taxation system—one for indigenous and one for foreign firms. All must be equal. No advantages to foreign firms in order to lure them. Otherwise, ditch the WTO.

It will take a major revolution or an outright collapse to stop all this nonsense. And with Global warming, pollution, resource lost, etc. Etc…. we do not have much time.

We have to start thinking outside the box. And listen to the squeals from the very rich.


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From Naked Capitalism: Why Does No One Speak of America’s Oligarchs?

One of the striking elements of the demonization of Cyprus was how it was depicted as a willing tool of Russian money launderers and oligarchs. Never mind the fact, as we pointed out, that Cyprus is not a tax haven but a low-tax jurisdiction, and in stark contrast with the Caymans and Malta, has double-taxation treaties signed with 46 nations and has (now more likely had) with six more being ratified. Nor is it much of a tax secrecy jurisdiction, according to the Financial Secrecy Index.

Confucius said that the beginning of wisdom was learning to call things by their proper names. The time is long past to kid ourselves about the nature of the ruling class in America and start describing it accurately, as an oligarchy.

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Just Crazy

Josh Marshall has a post entitled “Just Crazy”.  As usual I agree with some of what Marshall writes.  In this case, I think the post is just crazy.  In it he quotes “TPM reader AN” with approval who wrote (among other things)

…is there significant and recent precedent of an Administration refusing to enforce a duly enacted law passed by Congress and signed by a President?
I could be wrong but I cannot recall a recent example. I would not be surprised if the last time this happened (if ever) was pre-Civil War Lincoln presidency;…

How soon we forget.  Why it would be as if George W Bush refused to enforce The Patriot Act which he had signed into law.  You know the law which relaxed FISA but still required warrents for wiretaps.

Let me refresh the memories of Marshall and TPM reader AN

(Bush ignored the Patriot Act on the grounds that it was unconstitutional.  His legal advisor Yoo had argued that the Patriot Act is constitutional).


There are too many references to Bush refusing to enforce laws which he didn’t like and called unconstitutional for me to include links to one in a thousand of them.  But somehow AN has forgotten all of them.

I agree with Marshall  that “Chief Justice Roberts’ suggestion that President Obama should have stopped enforcing DOMA really was preposterous.”  Indeed, if the President feels free to ignore laws (and in this case disburse funds from the Treasury) because he says that Congress exceeding its authority, we wouldn’t have a new approach to Constitutional government we would have an absolute monarchy.  I mean if the President can place his judgement of what is constitutional above Congress’s why not also declare Supreme Court opinions unconstitutional.

The fact that our Constitutional order was suspended for 8 years (by the person who appointed Roberts) doesn’t mean that the correct approach to Constituional checks and balances is to condemn them.

The idea that the President should just disobey laws (in this case concerning taxing as per the plaintiff’s complaint) because he is willing to argue that they are unconstitutional is a direct assault not only on the US constitition but also on the very idea of a constitution.  I think Roberts should be impeached for misconduct (note judges and only judges can be impeached for acts which are not forbidden by the criminal code).

But the idea that utter contempt for the Constitution (which recall is not a suicide pact) is unprecedented is a Marshall howler which is itseelf unprecedented.

Marshall covered the story.  Indeed he covered it spectacularly.  How can he have forgotten so quickly ?

Update:  Just to clarify.  I admire Josh Marshall very very much.  My faith in him is not at all shaken by my disagrement with the “just crazy” post.

Update II:  This is rich.  It turns out that the Obama justice department isn’t the first to tell the Supreme Court that a law is unconstitutional.  Ian Millhiser at think progress notes that then acting Solicitor General John Roberts signed such an argument in 1990.  There is no evidence that Roberts denounced President George H.W. Bush for applying the law.

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By Jeff McCord

March 28, 2013

In the early days of his brilliant career as legal journalist and commentator, Anthony Lewis, who passed at age 85 on March 25, referred to a vision of the Supreme Court that served as his touchstone:

“[W]hen the channels of opinion and of peaceful persuasion are corrupted or clogged, these political correctives can no longer be relied on, and the democratic system is threatened at its most vital point. In that event, the Court, by intervening, restores the processes of democratic government; it does not disrupt them . . .”

These comments by Justice Harlan Fiske Stone in a footnote to his opinion in U.S. v. Carolene Products Co., decided in 1938, profoundly influenced Mr. Lewis. In that case, Stone upheld a federal statute prohibiting the interstate sale of “filled milk” – that is, milk or cream reconstituted with fats or vegetable oils from non-dairy cow sources.
Propublica  Friend of the Court: How Anthony Lewis Influenced the Justices He Covered

“Lost my Faith in the Idea of Progress”

Yet, by the time the famously optimistic Lewis retired from his New York Times op-ed chair in December, 2001, he said this to his exit interviewer:

“I have lost my faith in the idea of progress. I mean that in the sense that it was used at the beginning of the 20th century, that mankind is getting wiser and better and all . . .”

New York Times   After 50 Years of Covering War, Looking for Peace and Honoring Law

Was Mr. Lewis’ journey a classic “coming of age” story of lost optimism after 50 years spent covering and opining on great matters affecting and defining the legal rights of people of color, consumers and all citizens in a free society? True, Mr. Lewis was being interviewed in the fateful months following the Bush v. Gore decision that placed in power an Administration in which fact-based governance had given way to rule by the certainties of religious dogma and class-driven anecdotal evidence. Indeed, Mr. Lewis said as much:

“[C]ertainty is the enemy of decency and humanity in people who are sure they are right, like Osama bin Laden and John Ashcroft [President Bush’s attorney general and a Christian zealot].

Another source of disappointment for Mr. Lewis, who as a student sympathized with the democratic socialist movement in Britain, must have been the outcome of a little noted (by average citizens) battle to preserve legal accountability for Wall Street and Fortune 500 magnates and the accountants and lawyers who work for them. The first battle in a war to hold corporate wrongdoers accountable that continues was fought over one of then House Speaker Newt Gingrich’s “Contract with America” legislative measures. He called it “common sense legal reform.”

This was in the early and mid-nineties when many in Washington were certain that global free trade and freely moving markets, unfettered by regulation, would inevitably lead to progress. Humans acting on behalf of their enlightened self-interest would lift all boats in a rising sea.

And in those days, Congress and President Clinton enacted the free trade agreement with China and tore down the Glass Steagall Act wall between consumer-oriented depository banking and lending and corporate-oriented merchant and investment banking. During this same period, Mr. Lewis witnessed Congress and his beloved Supreme Court act to slash the legal restraints upon regal CEOs and a new class of global financial entrepreneurs.

“Tilting the Scales of Justice”

To Mr. Lewis and other notable voices in the wilderness, including Congressman Ed Markey, them SEC Chair Arthur Levitt and distinguished Harvard Law Professor Arthur Miller (Harvard’s web Site claims he once taught Chief Justice John Roberts), Newt Gingrich’s “common sense” legal reform legislation would tilt the scales of justice away from ordinary consumers and investors. Here is how Mr. Lewis boiled down the issues at stake:

“Prevent victims of securities fraud from suing. Immunize company officials who manipulate the price of stock by false statements. Stop lawsuits against accountants and lawyers who were involved in savings-and-loan scams. Good ideas? Not many Americans would think so. But those are some of the things that would result from passage [of the legislation formerly known as the Private Securities Litigation Reform Act of 1995].”

New York Times  Abroad at Home; Tilting the Scales

In his February 3, 1995 op-ed (“Tilting the Scales”) Mr. Lewis ridiculed the description of “common sense legal reform” as “Orwellian”. “A more accurate title would be the Protect the Wrongdoers Act,” he said.

And, in prophetic words that haunt us to this day, Mr. Lewis added:

“[The bill’s provisions] real purpose, are to insulate the rich and powerful from being called to account at law.”

In the months and years following that op-ed, Mr. Lewis witnessed enactment of that “Orwellian” legislation and, later, the explicit confirmation by the Supreme Court (in Stoneridge Investment Partners v. Scientific-Atlanta, Inc.) that accountants, lawyers and corporate executives who knowingly aid, abet and collude in securities frauds cannot be sued by their victims to recover their losses. Other Congressional measures and Court decisions tilted the legal and political playing fields further away from citizens to favor corporations and wealthy oligarchs.

Mr. Lewis also lived to see the inevitable consequences of liberating the self-interested from legal restraints – the worst financial and economic crisis since the Great Depression. And, the rich and powerful perpetrators of the catastrophe have not been called to account at law.

“It’s Worth Appealing to Reason”

Twelve years ago, Mr. Lewis did conclude his exit interview on a somewhat upbeat note:

“I’m not willing to give up on rationality . . . Look, why have I been writing columns rather than jumping off the George Washington Bridge? I believe it’s worth appealing to reason.”

Like Mr. Lewis, most of us excluded from the ranks of the one-percent choose not to jump off bridges. Rather, we cling to the belief that rationality and fact-based decision-making will again hold sway within the halls of Congress and high precincts of the Judiciary; that, despite Bush v. Gore and Citizens United, the Supreme Court can and may again “intervene to restore the processes of democratic government” that are “clogged and corrupted” by the rich and powerful.
# # #

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Ryan Roadmap to Prosperity 2013

Via Daily Kos Bruce Webb writes:

When the Ryan Roapmap to Prosperity/2013 Republican House Budget was released some otherwise sharp observers like Ezra Klein claimed it just gave Social Security a pass:

Here is Paul Ryan’s path to a balanced budget in three sentences: He cuts deep into spending on health care for the poor and some combination of education, infrastructure, research, public-safety, and low-income programs. The Affordable Care Act’s Medicare cuts remain, but the military is spared, as is Social Security. There’s a vague individual tax reform plan that leaves only two tax brackets — 10 percent and 25 percent — and will require either huge, deficit-busting tax cuts or increasing taxes on poor and middle-class households, as well as a vague corporate tax reform plan that lowers the rate from 35 percent to 25 percent.

Paul Ryan’s budget: Social engineering with a side of deficit reduction

Well Ezra got played. Actually Ryan built in language designed to force a ‘reform’ of Social Security IN THE VERY FIRST YEAR. And in a way certain to be based on a cuts only ‘fix’ that by the way can be fully blamed on the President and two Presidential appointees or at worst the ‘bipartisan’ process involved. But understanding why this is so requires some unpacking of the language and the underlying concepts Ryan uses to hide his fingerprints.

Below the fold will be found the bulk of Sec 704 of the Legislative Text of the 2013 Chairman’s Mark of the House Republican Budget. (pdf) The bold portions are added by me and discussed below the text and in comments.

(b) POLICY STATEMENT ON SOCIAL SECURITY.—It is the policy of this resolution thatCongress should work on a bipartisan basis to make Social Security sustainably solvent. This resolution assumes reform of a current law trigger, such that:
(1) If in any year the Board of Trustees of the Federal Old-Age and Survivors Insurance Trust Fund and the Federal Disability Insurance Trust Fund annual Trustees Report determines that the 75-year actuarial balance of the Social Security Trust Funds is in deficit, and the annual balance of the Social Security Trust Funds in the 75th year is in deficit, the Board of Trustees shall, no later than September 30 of the same calendar year, submit to the President recommendations for statutory reforms necessary to achieve a positive 75-year actuarial balance and a positive annual balance in the 75th-year. Recommendations provided to the President must be agreed upon by both Public Trustees of the Board of Trustees.
(2) Not later than December 1 of the same calendar year in which the Board of Trustees submit their recommendations, the President shall promptly submit implementing legislation to both Houses of Congress including his recommendations necessary to achieve a positive 75-year actuarial balance and a positive annual balance in the 75th year. The Majority Leader of the Senate and the Majority Leader of the House shall introduce the President’s legislation upon receipt.
(3) Within 60 days of the President submitting legislation, the committees of jurisdiction to which the legislation has been referred shall report the bill which shall be considered by the full House or Senate under expedited procedures.
(4) Legislation submitted by the President shall— (A) protect those in or near retirement; (B) preserve the safety net for those who count on Social Security the most, including those with disabilities and survivors; (C) improve fairness for participants; (D) reduce the burden on, and provide certainty for, future generations; and (E) secure the future of the Disability Insurance program while addressing the needs of those with disabilities today and improving the determination process.

Okay a lot to unpack here. In the Annual Report of the Trustees of Social Security one finds three different measures of actuarial balance/solvency: ‘Short term’ (10 years), ‘Long term’ (75 years), and ‘Infinite Future’. Actuarial balance is defined as having each actuarial period show a positive Trust Fund balance with an ending balance equal to one year of reserves. For ‘short term’ the test is stricter, it requires that EACH YEAR in the period show that one year of reserves (Trust Fund Ratio = 100), while long term limits itself to the actuarial period as a whole and its last year. Under current law the Trustees are required to recommend Congress take action whenever the combined Trust Funds fail the short term test. In so doing the Trustees also supply numbers for a cuts only or revenue only fix whether implemented immediately or at the point of actual shortfall but don’t make SPECIFIC recommendations, that being the job of the Legislative branch.
The Ryan Roadmap changes this in multiple fundamental ways. Currently Social Security on a combined basis and the Old Age Trust Fund in isolation pass the short term test with some comfort. On the other hand the Disability Trust Fund failed it some time back. Still Congress is not forced to do anything at all but monitor the situation. But if we take the long term test Social Security has been in failure mode each of the last 20 years plus. The Ryan Budget changes current law to make the long term test the ‘trigger point’ and as such mandates that SOCIAL SECURITY IS BROKEN RIGHT NOW. And moreover under this law MUST BE FIXED AND PERMANENTLY THE FIRST YEAR AFTER REPORT RELEASE.
That is far from ‘sparing’ Social Security as Klein would have it, Ryan actually puts it at the front of the line for Presidential and Legislative action. Under this language the release of the next Trustees Report after enactment triggers a Sept 1 deadline for a specific set of recommendations to the President, and for the President by Dec 1 to submit those recommendations or others constrained by the language of the act to establish ‘sustainable solvency’ to Congress which in turn starts a 60 day clock for the entire committee process and an ‘expedited process’ to be followed by the House and Senate after that.
While there is no strict statutory deadline for release of the Social Security Report prior to the last few years it was released like clockwork on March 30, meaning that this legislation even if enacted wouldn’t normally be triggered until the 2014 Report. On the other hand the SS Report has been released late the last few years and so in Ryan’s dreams this process could be triggered THIS YEAR with action to be completed by next Summer at the latest.
And it is at this point that we get the turd in the punchbowl. Under Ryan’s bill the initial recommendations have to be approved by BOTH the Public Trustees. Which if the Public Trustees were selected by some apolitical process under criteria that they actually serve the public interest at large might just be seen as isolating the recommendations from the explicitly political Trustees (under law the Commissioner of Social Security, and the Secretaries of Treasury, HHS, and Labor). But instead the Public Trustees are explicitly political with a legal mandate that they come from different parties. Moreover there is little to prevent a President from choosing an opposite party Public Trustee sympathetic to his goals or perversely choosing a same party Trustee hostile to the majority position of his own party.
Which is what we have now. The two current Public Trustees are Charles (Chuck) Blahous, previously Bush’s point man on privatization, for the Republicans and Robert Reischauer for the Democrats. A polite way of describing Reischauer would be ‘deficit hawk’ and ‘entitlements crisis’ promoter. Less polite people (like me) would describe him as Peter G Peterson’s representative to the Social Security Trustees. While Blahous is rather unapologetically employed by the Koch Brothers’ funded Mercatus Institute at GMU. And per Ryan EITHER or BOTH have an effective VETO on the initial recommendations. So while there would not be an official ‘Reischauer-Blahous Commission’ that is kind of a distinction without a difference. Because lets just say it is not hard to predict what the ‘Commission’ recommendations are going to look like, compared to them Chained-CPI would be a love tap. Which may be the plan all along. Not least on the part of the White House.
Now reality based Kossacks might well point out that the Roadmap is D.O.A. Which is of course correct. On the other hand just today Dick Durbin, formerly a certain Senator Obama’s mentor, introduced a plan for a ‘bi-partisan’ Social Security Commission that would itself introduce a fact track process eerily similar to the one in the Roadmap. And you don’t have to be a raving paranoid to not predict that Presidential or Democratic Senate leadership appointments to that Commission are likely to resemble Erksine Bowles and Robert Reischauer more than say Senators Sanders and Begich.

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Speaking of inequality

Travis Waldron at Think Progress pointed out this excellent article by David Cay Johnston. It dovetails well with my last post, which showed the fall of individual real wages and their failure to regain their peak fully 40 years after it was reached.

Johnston writes:

Incomes and tax revenues have grown from 2009 to 2011 as the economy recovered, but an astonishing 149 percent of the increased income went to the top 10 percent of earners.
If you wonder how that can happen, the answer is simple: Incomes fell for the bottom 90 percent.

While this data is at the level of tax filing households, it is consistent with what we see at the level of the individual. More nuggets from Johnston:

From 1966 to 2011, adjusted gross income in the bottom 90% grew a total $59 (2011 dollars, not the 1982-84 dollars I used in my last post) in 45 years, from $30,378 to $30,437.

“Candidate Bush said his tax cuts would make everyone prosper. But the real average pretax income of the bottom 90 percent in 2011 was $5,340 less than in 2000, a decline of more than $100 per week, or 15 percent, in pretax income.”

The income share of the bottom 90% fell from 66.3% to 51.8% over the 1966-2011 period.

So we have seen inequality increase in pretax income plus changes in tax policy that have reduced the effective tax rates on corporations and capital gains, income which goes overwhelmingly to the rich. Thus, post-tax inequality is even worse than pretax inequality.

Johnston’s report builds on the work of economists Emmanuel Saez and Thomas Piketty. Together with Facundo Alvaredo and Tony Atkinson, they have created the World Top Incomes Databases, very much worth checking out for a comparative look at U.S. inequality.

Cross-posted at Middle Class Political Economist.

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SCOTUSblog’s Tom Goldstein says a same-sex-marriage victory in DOMA almost precludes a same-sex-marriage victory in the Prop 8 case. I disagree.

Students of Windsor and Hollingsworth have always recognized a basic tension between the theories of gay-rights advocates in the cases.  The challenge to DOMA is undergirded by a sense that marriage is a matter for state rather than federal regulation.  The challenge to Proposition 8 is a direct challenge to just such a decision by a state.

Yesterday and today, the irresolvable depth of that tension in this Court became obvious. The arguments would be easier for the public to understand if they had occurred in reverse.

The arguments would be easier for the public to understand if they had occurred in reverse? Maybe.  But I think I understand them well enough to disagree the depth of that tension in this Court is irresolvable.  I say that, even recognizing that the operate words in Goldstein’s statement are “in this Court.”  By which he means, this Court with it’s membership.

Goldstein explains:

A majority of the Court seems poised in Windsor to invalidate DOMA Section 3 on the theory that the federal government has no interest in adopting a definition of marriage applicable to 1100 statutory provisions that as a practical matter alters the very nature of what it is to be “married.”  That role, the Court will rule, is historically reserved to the states.  So DOMA is a federalism [i.e., states’-rights] case. …

But if DOMA is going to be decided as a federalism case, Hollingsworth [the California Prop. 8 case] becomes a much harder case for the plaintiffs [who are challenging Prop. 8 as violative of individual rights].  That ruling in Windsor implies that California should have a parallel right to decide the definition of marriage for itself – i.e., that Proposition 8 should be upheld.

Except that that ruling in Windsor would imply that California should have a parallel right to decide the definition of marriage for itself under the Tenth Amendment, which is the main states’ rights provision of the Constitution.  Such a ruling in Windsor would say nothing at all about the Fourteenth Amendment, which is the main individual-rights provision of the Constitution vis-a-vis the states.

The Tenth Amendment does not trump or negate the Fourteenth Amendment–although I acknowledge that Kennedy and other uber-states’-rights proponents do claim sometimes that it does.  Kennedy does this, regularly, in state-prosecution criminal cases and in other lawsuits in state court when he effectively says that the Supremacy Clause exempts state judicial branches from its mandate.  But he (unlike, say, Clarence Thomas) does recognize the application of the Supremacy Clause to state legislative and executive branches.  And, presumably, to state voter referendums.  Such as Prop. 8.

I think Goldstein improperly conflates the Tenth Amendment and the Fourteenth Amendment in these cases.  The DOMA case is a Tenth Amendment case.  The Prop. 8 case is a Fourteenth Amendment case.  Just as with state criminal laws, a state law may violate the Fourteenth Amendment’s due process or equal protection guarantees to individuals, even if under the Tenth Amendment the state is entitled to enact laws within a generic genre–criminal law, family law, marriage law, for example.  The Fourteenth Amendment prohibits states from enacting laws that, although they are within those generic genres, nonetheless violate individuals’ rights conferred by the Fourteenth Amendment or some other part of the Constitution that establishes individuals’ rights.  

Kennedy does understand that. It was the basis for his opinion in Lawrence v. Texas, the state-criminal-sodomy-statute case in 2003.

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Looks like DOMA will be stricken … if the Court decides the issue at all in this case. [Expanded.and updated.]

Final update: #scotus 80% likely to strike down #doma. J Kennedy suggests it violates states’ rights; 4 other Justices see as gay rights.

–Tom Goldstein of SCOTUSblog, on Twitter


“The question is whether or not the federal government under a federalism system has the authority to regulate marriage,” Justice Kennedy said during oral arguments. At another point, he disagreed with the lawyer’s contention that the law simply creates a single definition for federal purposes. “It’s not really uniformity,” the justice said, because same-sex couples would not have access to federal benefits that traditional couples have.

Justice Kennedy’s point echoed one made by his more liberal colleagues.

Justice Ruth Bader Ginsburg said the federal law effectively created a two-tiered system of marriage. “There are two kinds of marriage,” she said. “Full marriage and the skim-milk marriage.”

5 Justices Seem Skeptical of Ban on Benefits to Gay Spouses, Adam Liptak and Peter Baker, New York Times

From what Liptak and Baker write, it sounds like Kennedy may vote to strike down DOMA as unconstitutional on equal protection grounds as well as on states-rights grounds, not just on the latter ground.  So it would be a 5-4 decision on that issue, not a 4-4-1 decision in which Kennedy takes no position on the equal protection issue.

That will be important down the road, once the Court does decide to decide the issue of marriage as a constitutional right for same-sex couples, which it looks like they won’t do in the California Prop. 8 case argued yesterday.  

But, for “jurisdictional” reasons, the Court might decide not to decide the constitutional issue in this case.  The Washington Post’s report on today’s argument discusses the procedural issue and what transpired on it during the argument this morning.  A majority could vote to dismiss the case and leave the lower appellate opinion, holding DOMA unconstitutional, intact, if the Obama administration did defend the law in that court; I don’t know whether it did or not.*  I doubt that that is what will happen, though.  I think a majority will say that there is a sufficient “case or controversy” between the plaintiff and the federal government, which enforced DOMA against her even though the administration is not defending the law in court, to permit the federal courts to decide this case. So, despite the House group’s lack of “standing” to be a party in the case, the Court would have jurisdiction to decide the case, as did the lower appellate court.

I explained the “standing” thing here yesterday, in the context the Prop. 8 case.


UPDATE: Here’s SCOTUSblog’s Lyle Denniston really thorough article reporting on and explaining it all.  Most interesting to me is this:

Justice Kennedy told [attorney Paul] Clement that there was “a real risk” that DOMA would interfere with the traditional authority of states to regulate marriage.   Kennedy also seemed troubled about the sweeping breadth of DOMA’s Section 3, noting that its ban on benefits to already married same-sex couples under 1,100 laws and programs would mean that the federal government was “intertwined with citizens’ daily lives.”   He questioned Congress’s very authority to pass such a broad law.
Wow.  This is not just an equal-protection statement.  This is even more basic.  It is a substantive-due-process-rights statement.  As in: There are constitutional limits to which the government–state or federal–is permitted to interfere in personal and private decisions. That was the ground on which Kennedy and the justices who joined his opinion a decade or so ago held Texas’s criminal anti-sodomy law unconstitutional. 


*The Obama administration never defended DOMA in the Windsor case, the case argued today. The plaintiff, Edie Windsor, won in the trial-level court, and then in the Second Circuit Court of Appeals.  So if the Supreme Court dismisses the appeal, which was filed by a group of House Republicans, on the ground that that group lacks standing to be a party to the case at any level, that would reinstate the trial-court ruling in Windsor’s favor, but that ruling would have no precedential effect in other cases even within the Second Circuit. But, as I said above, and as Lyle Denniston says, it’s likely that the Court will say that there is an active case and controversy between Windsor and the federal government because the government did enforce DOMA against her until she filed the lawsuit and won in the lower courts.

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Full-Reserve Banking Goes Mainstream

Imagine that all bank deposits — the dollars in your checking account — were 100% backed, one-for-one, by your bank’s reserve holdings at the Fed (the modern, fiat-money-world equivalent of gold reserves). Runs on bank deposits would be impossible, because the outfit that issues reserves and currency can’t run out of reserves and currency — any more than a bowling alley can run out of points. You could always take your money out of the bank.

Meanwhile all lending would come from actual investment funds, in which the investors (via equity or debt) are explicitly putting their funds at risk in hopes of getting better returns.

As pointed out by Matthew C. Klein — recently transplanted from The Economist to Bloomberg View — this notion…

…has a long and distinguished academic lineage. Luminaries such as Irving Fisher, Milton Friedman and James Tobin have all advocated it.

For instance, the “Chicago Plan” was developed in the 1930s by Fisher and Henry Simons. Friedman later endorsed it as well. Two researchers at the International Monetary Fund have written an up-to-date appraisal – and the proposal, in theory, does everything its designers claimed 80 years ago. The first 20 pages of this paper are an excellent primer.

Tobin explained the essence of the idea in 1987 at the Federal Reserve’s annual economic symposium in Jackson Hole:


“I think the government should make available to the public a medium with the convenience of deposits and the safety of currency, essentially currency on deposit, transferable in any amount by check or other order…The Federal Reserve banks themselves could offer such deposits, a species of ‘Federal Funds.’”

More recently, Boston University economist Larry Kotlikoff has argued that we need to completely separate money from credit by introducing what he calls “limited purpose banking.” It’s basically the same idea.

Matthew says “This is the remedy advocated by Bloomberg View’s editors.” That’s pretty mainstream.

I’d go even farther and recommend Steve Randy Waldman’s idea of “starter savings accounts,” in which you could get a guaranteed 0% real return — no matter the level of inflation — on up to $200,000 in deposits. This would insulate the real economy from the vagaries of the financial system’s floods and droughts. Got confidence?

These ideas are not as simple as they sound — there are institutional and incentive issues to address. But separating the mundane business of administering holdings and payments from the ever-more-arcane business of lending and investment is not some wacky internet econocrank idea. It’s downright conservative.

Cross-posted at Asymptosis.

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Out of the Mouths of Hypocrites: Scalia Says Citizens United Was Wrongly Decided.

Yes, that’s right.

Scalia said Citizens United was wrongly decided.

He said it yesterday, at the argument on the constitutionality of California’s Prop. 8.  He also said that the right to bear arms doesn’t, after all, preclude the federal government and the states from enacting gun-ownership restrictions as they wish, so the recent Court opinions holding otherwise were decided incorrectly.  And we now know that the Court will uphold Texas’s college-admissions affirmative action law as constitutional and that Scalia will join in the opinion.  

Here’s the lengthy exchange between him and Ted Olson, the lawyer for the same-sex couples who challenged the constitutionality of Prop. 8:

JUSTICE SCALIA: You — you’ve led me right into a question I was going to ask. The California Supreme Court decides what the law is. That’s what we  decide, right? We don’t prescribe law for the future. We — we decide what the law is. I’m curious, when -­when did — when did it become unconstitutional to exclude homosexual couples from marriage? 1791? 1868, when the Fourteenth Amendment was adopted? Sometimes — some time after Baker, where we said it didn’t even raise a substantial Federal question? When — when — when did the law become this?

MR. OLSON: When — may I answer this in the form of a rhetorical question? When did it become unconstitutional to prohibit interracial marriages? When did it become unconstitutional to assign children to separate schools.

JUSTICE SCALIA: It’s an easy question, I think, for that one. At — at the time that the Equal Protection Clause was adopted. That’s absolutely true. But don’t give me a question to my question. (Laughter.)

JUSTICE SCALIA: When do you think it became unconstitutional? Has it always been unconstitutional?

MR. OLSON: When the — when the California Supreme Court faced the decision, which it had never faced before, is — does excluding gay and lesbian citizens, who are a class based upon their status as homosexuals — is it — is it constitutional -­
JUSTICE SCALIA: That — that’s not when it became unconstitutional. That’s when they acted in an unconstitutional matter — in an unconstitutional matter. When did it become unconstitutional to prohibit gays from marrying?
MR. OLSON: That — they did not assign a date to it, Justice Scalia, as you know. What the court decided was the case that came before it -­ JUSTICE SCALIA: I’m not talking about the California Supreme Court. I’m talking about your argument. You say it is now unconstitutional.


JUSTICE SCALIA: Was it always unconstitutional?

MR. OLSON: It was constitutional when we -­ as a culture determined that sexual orientation is a characteristic of individuals that they cannot control, and that that -­

JUSTICE SCALIA: I see. When did that happen? When did that happen?

MR. OLSON: There’s no specific date in time. This is an evolutionary cycle.

JUSTICE SCALIA: Well, how am I supposed to know how to decide a case, then -­

MR. OLSON: Because the case that’s before you -­

JUSTICE SCALIA: — if you can’t give me a date when the Constitution changes?

MR. OLSON: — in — the case that’s before you today, California decided — the citizens of California decided, after the California Supreme Court decided that individuals had a right to get married irrespective of their sexual orientation in California, and then the Californians decided in Proposition 8, wait a minute, we don’t want those people to be able to get married.

CHIEF JUSTICE ROBERTS: So — so your case — your case would be different if Proposition 8 was enacted into law prior to the California Supreme Court decision?

MR. OLSON: I would make — I would make the — also would make the — that distinguishes it in one respect. But also — also — I would also make the argument, Mr. Chief Justice, that we are — this -­ marriage is a fundamental right and we are making a classification based upon a status of individuals, which this Court has repeatedly decided that gays and lesbians are defined by their status. There is no question about that.

JUSTICE SCALIA: So it would be unconstitutional even in States that did not allow
civil unions?

MR. OLSON: We do, we submit that. You could write a narrower decision.

JUSTICE SCALIA: Okay. So I want to know how long it has been unconstitutional in those -­

MR. OLSON: I don’t — when — it seems to me, Justice Scalia, that -­

JUSTICE SCALIA: It seems to me you ought to be able to tell me when. Otherwise, I don’t know how to decide the case.

MR. OLSON: I — I submit you’ve never required that before. When you decided that — that individuals — after having decided that separate but equal schools were permissible, a decision by this Court, when you decided that that was unconstitutional, when did that become unconstitutional?

JUSTICE SCALIA: 50 years ago, it was okay?

MR. OLSON: I — I can’t answer that question, and I don’t think this Court has ever phrased the question in that way.

JUSTICE SCALIA: I can’t either. That’s the problem. That’s exactly the problem.

MR. OLSON: But what I have before you now, the case that’s before you today, is whether or not California can take a class of individuals based upon their characteristics, their distinguishing characteristics, remove from them the right of privacy, liberty, association, spirituality, and identity that -­ that marriage gives them. It — it is — it is not an answer to say procreation or anything of that nature, because procreation is not a part of the right to get married.

“Baker”–as in, “Sometimes — some time after Baker, where we said it didn’t even raise a substantial Federal question? When — when — when did the law become this?”–refers to a 1972 case called Baker v. Nelson, which, as Linda Greenhouse explained last week in a terrific column in the New York Times, involved a challenge to the constitutionality of Minnesota’s bar to same-sex marriage was unconstitutional.  Under a federal statute that was repealed in (I believe) 1986 at the specific request of William Rehnquist, the Supreme Court was required to consider all cases involving federal constitutional issues in which the immediate lower court was a state (rather than a federal) court of appeals.  So in Baker, the Court summarily ruled in a pro forma single sentence without briefing, much less oral argument, that the case failed to raise a substantial question of federal law.  I.e., there was no constitutional right of same-sex couples to marry.

Which leads me right into a question that I hope the Dem-appointed justices ask in their dissents in Fisher v. University of Texas, the affirmative action case argued at the Court earlier this term: When, exactly, did it became unconstitutional for a state university to consider race in its admissions process?  1791? 1868, when the Fourteenth Amendment was adopted? Some time after Bollinger v. Grutter in 2003, when although the Court did say the issue presented a substantial question of federal law, the Court also said that race was, like other criteria beside academic qualifications (such as regional demographics and such as “legatee” considerations), constitutionally permissible?

And I hope that the next time a state such as Montana enacts a stringent campaign-finance law, Scalia himself will ask the Koch brothers, or the Citizens United organization, or whoever is the named* plaintiff in the case, when exactly such laws became an unconstitutional violation of the First Amendment’s speech clause. 1791? 1868, when the Fourteenth Amendment was adopted? Was it sometime after 1912, when Montana enacted the statute that the Supreme Court last June summarily held was unconstitutional under the Citizens United opinion, which was not issued shortly after 1781 or 1868 but instead in 2010?

These are easy questions.  The lawyers for the challengers of these laws should have an easy time answering them. The answer, of course, being that “originalism” can be, and is, turned on and off like a water faucet by those who subscribe to it as a legal theory when the weather is fair.

*Oh. dear. There was a really funny typo in that sentence originally: “naked plaintiff,” instead of “named plaintiff.” I probably should have left it that way.

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