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

International Law, As Established At Nuremberg*: The ACTUAL Grounds On Which the Supreme Court Will Rule For Shell Oil’s Parent Company In Kiobel v. Royal Dutch Petroleum

In her post earlier today on Kiobel v. Royal Dutch Petroleum, the sort-of-CitizensUnited-like case argued yesterday in the Supreme Court, Linda discusses the issue that was supposed to be the one that the Court would decide, because, well, that was the issue that the lower appellate court, the Second Circuit Court of Appeals, decided.  The issue is whether under the Alien Tort Statute, which was enacted in 1789 and allows “aliens” to file civil lawsuits in the U.S. for violations of the “law of nations,” allows aliens to sue corporations, or instead only individuals, for violations of human rights as defined under clearly-established international law.

The Second Circuit court said it doesn’t, and, as the excerpt from that opinion that Linda posts shows, the appellate panel used as its justification the judges’ own moral judgment that since individuals (i.e., the corporation’s top executives) make the corporate decisions to leverage the corporation’s resources to accomplish these heinous acts, only those individuals, and not the ill-used corporation itself, should be suable.  And that therefore, only those individuals, and not the ill-used corporation itself, will be suable in U. S. federal courts under the ATS.

This notwithstanding that the statute itself says nothing at all about whocan be sued under it; it states only what acts the actor can be sued for.  And notwithstanding that the Second Circuit panel’s stated grounds for the ruling, if not necessarily the result (the dismissal of the lawsuit), conflict with the Supreme Court’s ruling two years ago in Citizens United v. FEC.  Which parlayed the First Amendment free-speech right of individuals into a right of corporate CEOs to leverage those rights of its individual human shareholders into a First Amendment speech right of the CEO to use corporate funds to advance his or her political preferences.

The plaintiffs in the case, 12 Nigerians, allege that Shell Oil aided and abetted the Nigerian government in committing horific violations of human rights against protesters of the company’s operations in that country in the 1990s.  According to the several reports I’ve read about yesterday’s argument, Anthony Kennedy, author of the Citizens United opinion, said at the very outset that he agreed with Shell’s statement in its brief that international law does not recognize corporate liability. Case closed.
But Elena Kagan (not a personal favorite of mine, for reasons that I’ll leave for another post, but someone who does demonstrate the ability to recognize distinctions in procedural/jurisdictional law in response to Kennedy’s indications that he cannot, and who is not shy about showing it; this is the second time in about a year that Kagan has done that during an oral argument) pointed out that international law addresses the acts that violate universally accepted human rights, but is silent on who can be sued for committing those acts.

And Samuel Alito and Stephen Breyer agreed. “Let’s assume that the French ambassador is assaulted or attacked in some way in the United States, and that that attack is by a 10 corporate agents. Would we say that the corporation cannot be sued under the Alien Tort Statute?” Slate’s Dahlia Lithwick quotes Alito as asking Kathleen Sullivan, Shell’s lawyer.  Who responded, “Yes, because there is no assaulting ambassador norm that applies to corporations.” Oh?  Does the State Department’s Foreign Service know this?  

Lithwick also quotes Sullivan as saying that “Nuremberg, if it established nothing else, established that it is individuals who are liable for human rights offenses.” She must be right that that’s what the Nuremberg trials established, since the Nuremberg prosecutors didn’t indict Volkswagen and try to have it executed. 

Breyer suggested that pirates should incorporate themselves, under the name “Pirates, Inc.”  A company in which I want to buy stock, if it ever goes public. Under international securities law.  As established at Nuremberg.

Nuremberg, by the way, didn’t establish “nothing else.”

Lithwick suggests that a majority of the justices will not say that corporations cannot be sued under the ATS.  Given the 5-4 ruling in Citizens United, the juxtaposition of the two opinions would be too damaging to the Court’s standing among the public.  I agree; after all, the First Amendment doesn’t say that corporations have First Amendment speech rights, nor mention corporations at all, but that didn’t stop the majority of justices from …  well ….

But neither do I think the Court will say that the ATS does allow lawsuits against corporations for violations of internationally recognized human rights. I think a majority will decide not to decide that issue at all, in this case.  Instead, a majority will say what Alito said at another point: that the statute was not intended to allow people who have no connection to the United States to sue under the statute for violations of human rights by anyone—human or corporate—that himself/itself has no legal-status connection to the United States and that occurred outside the United States.  The Nuremberg defense will have to await another day to succeed or not.

Alito’s French-ambassador-assaulted-in-the-U.S. hypothetical was not a random fact selection. The purpose of the statute, it was made clear during the argument, was to grant ambassadors to the U.S. the right to sue in U.S. court for violations of human rights committed in the U.S—rights they have long had here anyway.  But this is a very old statute, and apparently predates those rights.  The statute itself doesn’t say that it’s limited to circumstances involving victims or perpetrators who have with legal ties to the U.S.  But, whatever.  

I expect that the Court will fill in those blanks.  Although I won’t bet on it. I’ll save my money instead for the Pirates, Inc. IPO.

*Just to be clear: The first part of the title—the part before the colon—is intended as sarcasm.  It’s a takeoff on Kathleen Sullivan’s weird claim about the meaning of the Nuremberg trials.

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Twenty-Six Republican State Attorneys General v. W. Mitt Romney (subtitle: Does Romney’s Economic Plan Violate State Sovereignty?)

Okay, folks.  The title of this post is not really also the title of a lawsuit.  Not formally, anyway.  But it could suffice as the title for the final hour of the six hours of oral argument in the Supreme Court late next month on the constitutionality of the Patient Protection and Affordable Care Act. 

A.k.a., Obamacare. 

More specifically, and more seriously—very seriously, actually—Romney’s newly-announced budget plan undermines the argument of the 26 Republican state attorneys general who, in the name of their states, are contesting the constitutionality of the part of the ACA that expands the Medicaid program so that it will operate as a key mechanism by which to provide healthcare coverage to those who cannot afford to buy healthcare insurance.

The legal issue, like the other legal issues that will be argued that week that are not known as the “individual-mandate” provision, and that therefore have not been discussed ad nauseam in the media, is very inside-baseball-ish stuff.  But unlike most of those other issues, which (like this one) the Court has accorded a designated time allotment separate from the individual-mandate issue, this issue is not merely a procedural one having to do with, say, who has “standing” (the legal right) to challenge the constitutionality of the provision, or whether the law can be challenged at all before it becomes effective in 2014.

No, this issue, like the minimum-coverage provision, a.k.a., the individual-mandate provision, cuts to the heart of much, or most, of the statute.

The specific case that the Supreme Court agreed to hear is the one decided last August by the Atlanta-based 11th Circuit Court of Appeals, the federal regional appellate court for several Southeastern states, based in A.  In a 2-1 opinion, the panel that decided the case held the individual-mandate provision unconstitutional—a ruling that conflicted with a 2-1 opinion issued two months earlier by the Cincinnati-based 6th Circuit Court of Appeals. 

The 6th Circuit opinion, the first one issued by an appeals court addressing the constitutionality of the ACA, was notable both for its author, Jeffrey S. Sutton, a conservative G.W. Bush appointee, and for the fineness of its constitutional analysis.  Specifically, the distinction between the Commerce Clause, the clause under which Congress had enacted the ACA and the clause under which the constitutionality of the individual-mandate provision was being challenged, and the Fifth Amendment’s due process clause, which the challengers were not expressly invoking but that Judge Sutton recognized was the appropriate constitutional provision to assert in light of the nature of their argument.  The Commerce Clause, he said, was not. 

The 11th Circuit opinion, for its part, was notable in that the judge who joined the majority-opinion writer, Joel F. Dubina, a conservative G.H.W. Bush appointee, in holding that the individual-mandate provision does exceed Congress’s legislative authority under the Commerce Clause because the provision violates the Fifth Amendment’s due process clause, or something, was Clinton appointee Frank M. Hull.  The majority also held that the remainder of the statute was “severable” from the individual-mandate provision; that is, the rest of the statute could survive the demise of the individual-mandate provision because the other provisions were not so intrinsically dependent upon or related to the individual-mandate provision that they couldn’t function without the stricken provision.  (The Supreme Court will hear 90 minutes of argument on this “severability” issue.)

Among the provisions that the entire 11thCircuit panel upheld as constitutional was the expanded-Medicaid provision.  Which Romney has now implicitly said is constitutional under the Spending Clause, the constitutional power under which Congress enacted that part of the ACA.  And which, more relevant here, Romney has said implicitly, does not violate the Tenth Amendment, which reads, “The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people, and which serves as the rallying cry for the neo-conservative states’-rights, state-sovereignty crowd.

Let me explain.  Or, better, let Judge Dubina and Romney explain. Separately, of course.

First, Judge Dubina.  He explains that “Medicaid is a long-standing partnership between the national and state sovereigns that has been in place for nearly half a century [and that] Medicaid is a jointly financed federal-state cooperative program, designed to help states furnish medical treatment to their needy citizens.”  He then notes that state participation in the program is voluntary, and that under the Medicaid Act as it currently exists, the states must, in order to participate, “meet various guidelines, including the provision of certain categories of care and services [and that some] of these categories are discretionary, while others are mandatory for participating states.”

He explains that the ACA expands the Medicaid program, that this expansion “serves as a cornerstone for expanded health care coverage.” And that the 26 attorneys general who have made their states plaintiffs in this lawsuit claim that the ACA’s “expansion of the Medicaid program, enacted pursuant to the Spending Clause, is unduly coercive under South Dakota v. Dole,” a 1987 Supreme Court opinion, which created what is known as the “coercion doctrine.”  Judge Dubina explains that, too: The coercion doctrine holds that “Congress may not employ the spending power in such a way as to ‘coerce’ the states into compliance with the federal objective.”  He also explains why the panel concluded that, in enacting the expanded-Medicaid provision, it did not.

First among those reasons is that as with the original Medicaid Act and earlier amendments to it that increased the states’ obligations, states retain the option to withdraw from the program.  The states acknowledge this fact—that they can, as matter of law, withdraw from participation in the program—but argue that as a matter of political reality, they cannot. Participation in the Medicaid program is simply too popular in each state, the results of withdrawal too distasteful, to make a state’s withdrawal from the program politically tenable.  Yet, they say, the additional state-funded mandate intrudes too much into each state’s right to determine their own budget priorities (spending and taxing), because the money must either be taken from other legislative priorities or from higher or additional taxes. 

The states are, in other words, hooked on federal Medicaid funds, and their state legislators are unwilling to withdraw the drug.  Er, the federal financing.  This violates the states’ sovereignty under the Tenth Amendment.  Indirectly.  But directly enough.

To which Judge Dubina responds that the initial Medicaid Act warned the states that Congress might make changes to the program, down the road.  But of course, well, cocaine addicts were warned of the addictive statute of that drug, and they took that first step anyway.  So this i-was-conned-into-it excuse won’t suffice.  Probably.

But Dubina also mentions that the ACA does not actually say that refusal to participate in this portion of the Medicaid program would require the state to withdraw from the entire Medicaid program; the states probably would see only some of their Medicaid funds withdrawn.  But this is of little consolation to an addict.  Or a states-rights asserter.

But then Dubina states the coup de grâce: The question of continued state participation in the Medicaid program is a political one, not a Tenth Amendment one.   Participation by the states in the federal Medicaid program continues to be voluntary, not compulsive, whether or not the states are addicted politically to receipt of the federal Medicaid money.

That is a statement of law with which Mitt Romney wholeheartedly agrees.  He made that clear last Friday, when speaking to the assembled members of the Detroit Economic Club.  Unveiling his amended deficit-reduction plan, he said:

Second, we will return federal programs to the states. I will send Medicaid back to the states and cap that program’s rate of growth. And I will do the same for other programs, like food stamps, housing subsidies and job training.

Okay.  Only if federal funding for these safety-net programs is eliminated or dramatically cut—as the math would require, given the draconian tax cuts that Romney also promised in that speech—would this policy of “returning” these programs to the states impact the federal budget significantly, or at all.

So, next month, when Solicitor General Donald Verrilli is arguing to the Court in that final hour of argument on the constitutionality of the ACA, I hope that, exhausted as he may be, he remembers to invoke the name of that most expert of constitutional scholars on the issue of the coercion doctrine: Mitt Romney.

And I hope that down the road, during the campaign, President Obama remembers to mention that Romney’s plan to balance the budget includes ending federal funding for Medicaid, food stamps, housing subsidies and job training—and suggesting that the states pick up the tab.

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… And Whom Would President Romney Pay Off? Do Tell!

Car sales “are growing so fast that Detroit can barely keep up,” according to an AP report published this evening bearing a Detroit dateline.  “Three years after the U.S. auto industry nearly collapsed, sales of cars and trucks are surging. Sales could exceed 14 million this year, above last year’s 12.8 million.”
The report says that as a result, carmakers and their suppliers are adding shifts and hiring thousands of workers around the country.  Most of the added jobs in the upper Midwest are for the Big Three carmakers and their suppliers. 

That’s the good news.   But two of these carmakers, and many of the suppliers in the Midwest and elsewhere in the country, would have collapsed in 2009 but for the government bailout of those two carmakers.

So the good news is really bad news, Romney told Fox News today, in sticking to his anti-bailout stance.  “The president ‘was paying off the people that supported him and that, by the way, are trying to get him re-elected,’ Romney said,” according to the AP report.

What?  No longer a Detroit-would-have-been-better-off-without-the-bailout claim?  Just an Obama-was-paying-off-the-UAW-and-only-incidentally-saved-the-US-auto-industry-and-hundreds-of-thousands-of-jobs defense? 

I dunno.  This doesn’t sound to me like a winning complaint for the general election.  Especially since the obvious question is: And whom will you be paying off as president, Mr. Romney?

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Why Romney Doesn’t Want A Canadian National Healthcare ID Card

Romney’s best line of the day was unscripted. A stray Canadian had driven from Ontario to ask Romney a question and in the process joked that Romney could not have his ID card for Canada’s national health-care system.

The ball sat on the tee for a long second before Romney hit it. “I don’t want it!” Romney said. The crowd roared.

— “Two Michigan rallies revealRomney, Santorum flaws,” David A. Fahrenthold, Washington Post, Feb. 25, reporting on a rally earlier that day in Shelby Township, Mich. (suburban Detroit)

Hmm.  Well, okay.  Romney and his wife Ann, an MS victim, have about $220 million with which to pay their medical expenses. 
But there’s another reason that they don’t need national medical insurance: They live in Massachusetts, and so, by law, have medical insurance, even though neither Romney nor Ann is employed and even though Ann has a serious medical condition the onset of which predates the end of their coverage through Romney’s last employer.  That law is known, among those who deride it, as “Romneycare.”

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Steven Rattner Cross-Examines Romney. Hooray.

Steven Rattner, the lead adviser on the Obama administration’s auto task force in 2009, has an op-ed titled “Delusions About the Detroit Bailout” in today’s New York Times.   Some highlights:

As a presidential aspirant, Mr. Romney evidently hasn’t felt a need to be consistent or specific as to what should have been done to address the collapse of the auto industry starting in late 2008. But the gist is that the government should have stayed on the sidelines and allowed the companies to go through what he calls “managed bankruptcies,” financed by private capital.

That sounds like a wonderfully sensible approach — except that it’s utter fantasy. In late 2008 and early 2009, when G.M. and Chrysler had exhausted their liquidity, every scrap of private capital had fled to the sidelines.

I know this because the administration’s auto task force, for which I was the lead adviser, spoke diligently to all conceivable providers of funds, and not one had the slightest interest in financing those companies on any terms. If Mr. Romney disagrees, he should come forward with specific names of willing investors in place of empty rhetoric. I predict that he won’t be able to, because there aren’t any.

Rattner then says that without government financing, the two companies would have been unable to undergo Chapter 11 reorganization, and instead would have been forced to cease production and liquidate.  He then addresses the claim that Obama improperly rigged the reorganization to favor the UAW:

Among Mr. Romney’s grievances — and to be fair, those of other opponents of the auto rescue — is that the auto task force trampled on bankruptcy precedents and even the law to effect President Obama’s plan of “shared sacrifice” by all stakeholders.

What he conveniently ignores is that the president’s plan was litigated throughout the federal court system — all the way to the Supreme Court, in the case of Chrysler — without so much as a nod to the opponents from a single judge.

“[E]very stakeholder received more from our plan than if the companies had been left to go bankrupt on their own,” Rattner says.

My question is: Why has Romney gotten away for so long without being asked during say, one of the 20 debates, who, exactly, would have provided the private funding that he claims was available.  And, if he can’t answer that question, why does he keep making the claim?

Apart from the obvious—that Romney habitually simply fabricates statements of fact to support his ideology and his political ambitions—this particular fabrication seems to me to get to the very heart of the supposed raison d’être for his candidacy: his business and economics acumen.  He either was dangerously mistaken about the availability of private funding for the restructurings or, as president, he would just make up evidence on which to base critical decisions—with results as dramatically different than he predicts at the outset as the auto company bankruptcies would have been had Bush and Obama actually followed his advice as he now claims they did.  
Why has this not occurred to anyone until now?  Anyone who matters, anyway.

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Stolen Valor and the First Amendment*

You don’t have to be a conservative who’s helped coopt the American flag as a rightwing Republican political symbol—replacing the Elephant, which no one under the age of 50 even recognizes anymore as the GOP’s official emblem—to be offended by someone’s false claim of having received a military honor, especially one awarded for extraordinary valor.  Count me among those who both distain the GOP’s appropriation of the flag as its partisan symbol—my late father, a combat veteran, a lifelong liberal Democrat, and famously (among those who knew him) very mild-mannered, used to suggest angrily that the next time a military draft is needed, Congress limit it to registered Republicans—and who find repulsive the misrepresentation of receipt of such a military honor.

So I sympathize with the sentiment of the members of Congress who voted to enact the Stolen Valor Act, signed into law in 2006, which criminalizes the false representation of having received any U.S. military decoration or medal and which provides for a more severe penalty for falsely claiming to have been awarded the Medal of Honor than any other decoration or award.  But not enough to want the Supreme Court to uphold its constitutionality, in the case in which it heard oral argument this morning. Nor do I expect that the Court will uphold it, notwithstanding Scalia’s apparent vote to do so, in seeming contradiction to his famous vote in a 1989 case to strike down a Texas statute that criminalized flag burning.  (Notably, Scalia and Stevens swapped ideological roles in that case, with Stevens voting to uphold the law and Scalia providing the fifth vote to strike it down as violative of the First Amendment.)  And notwithstanding his joining the opinion written by John Roberts for all the justices except Alito two years ago striking down as a First Amendment violation a 1999 federal statute making it a felony to depict in a video, or sell the video depiction, of people crushing small animals for sexual gratification. That’s because I don’t think Scalia’s vote will be needed.

I believe that the crush-video opinion, United States v. Stevens, is the more relevant one, because, unlike the flag-burning case, Texas v. Johnson, the purpose of the speech that the statute prohibits is not political, and therefore is not “core” First Amendment speech under the Court’s free-speech jurisprudence, but instead is made for the personal benefit of the speaker. Which is why I expect that Kennedy, who joined Scalia in the flag-burning-statute case, and Roberts will vote to strike down the Stolen Valor Act as unconstitutional.


Mark Sherman, the Associated Press’s Supreme Court correspondent, reported after this morning’s argument:

Some justices said they worried that upholding the Stolen Valor Act could lead to other limits on speech, including laws that might make it illegal to lie about an extramarital affair or a college degree, or to impress a date.
“Where do you stop?” Chief Justice John Roberts asked at one point.

But Roberts later joined other justices in indicating that the court could make clear that, if it upheld the law, it would only be endorsing an effort to prevent people from demeaning the system of military honors that was established by Gen. George Washington in 1782.

Well, yes.  And had the Court upheld the crush-video statute as constitutional, it would only have been endorsing an effort to prevent people from sadistically crushing small animals to death—one of the videos at issue showed a woman killing a small dog by stomping the spike heel of her shoe into the dog—demeaning humanity, as Alito effectively implied in his dissent.  He said that in his opinion, the most relevant First Amendment opinion was one from 1982, in a case called New York v. FerberFerberheld that, even independent of the “obscenity” exception to First Amendment protection, child pornography is not protected speech, because advertising and selling child pornography provides an economic motive for producing child porn, which in turn is intrinsically related to child sexual abuse and which in fact usually involves the use of actual children, and which has little artistic value—and that the government has a compelling interest in preventing sexual exploitation of children.

“I believe,” Alito said, “that Ferber’s reasoning dictates a similar conclusion here.”  No, he granted, the government’s interest in preventing sexual exploitation of children is more compelling than its interest in preventing the sadistic sacrifice of defenseless animals in the name of profit.  But the government does nonetheless have a strong interest in preventing the sadistic sacrifice of defenseless animals in the name of profit, and that interest is compelling enough to overcome the strong presumption of First Amendment protection, given that the sole purpose is profit, not art, not politics, not information.  Just profit.

To which I, a dog lover of the first magnitude, and someone who near-literally feels the physical pain of an abused animal she’s read about, said to myself, “I agree.” 

But John Roberts didn’t and either did Antonin Scalia or Anthony Kennedy.

“When Congress passed this legislation, I assume it did so because it thought that the value of the awards that these courageous members of the armed forces were receiving was being demeaned and diminished by charlatans. That’s what Congress thought,” Sherman quotes Scalia as saying this morning. 

Well, maybe that is what Congress thought, but it enacted the statute without first holding any hearings on it.  And Sonia Sotomayor provided some evidence this morning to refute the contention that the lies have devalued the military medals, including the Medal of Honor, have been diminished by the lies of people claiming falsely to have been awarded them.  Acknowledging that the lies justifiably provoke an emotional reaction, she noted that the Court has long and repeatedly held that the provocation of offense, alone is insufficient to justify government censorship.  Her money line?  “So outside of the emotional reaction, where’s the harm? And I’m not minimizing it. I, too, take offense when people make these kinds of claims, but I take offense when someone I’m dating makes a claim that’s not true.” 

Sherman mentions after the quote that Sotomayor is divorced.  

Which brings the question back full circle, to Roberts’ question, “Where do you stop?”  My guess: With a well-meaning statute that criminalizes the making of a false claim to have received a military honor.  Which, offensive as it, does not encourage sadistic killing of animals in order to videotape them for profit.   

The case argued today is U.S. v. Alvarez.


* UPDATE: Dahlia Lithwick’s Supreme Court Dispatches report on the oral argument, posted tonight on Slate, is a must-read.  My take, after reading it: That trademark infringement is now gonna be a criminal offense.  Well, not having the trademark, actually, but saying you have a copy of it when you don’t.

Uh-oh. I better stop saying that that crystal vase in my living room is a Waterford. Y’know, when people ask.  


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The New York Times confirms that Bain Capital really, really REALLY did not want to lend GM and Chrysler money for their managed bankruptcies. Really.

According to an article in today’s New York Times, Bain Capital was asked to do so, but declined.  Well, actually it was asked to help GM out, and declined.

The article recounts much of the controversy concerning Romney’s actual position on a government bailout for the companies back in 2008-09 and his current statements about it, and how these are playing out now politically here in Michigan and possibly in other states in which there is a heavy auto-industry presence.  About two-thirds down, the article says:

To go through the bankruptcy process, both companies needed billions of dollars in financing, money that auto executives and government officials who were involved with Mr. Obama’s auto task force say was not available at a time when the credit markets had dried up. The only entity that could provide the $80 billion needed, they say, was the federal government. No private companies would come to the industry’s aid, and the only path through bankruptcy would have been Chapter 7 liquidation, not the more orderly Chapter 11 reorganization, these people said.

In fact, the task force asked Bain Capital, the private equity company that Mr. Romney helped found, if it was interested in investing in General Motors’ European operations, according to one person with direct knowledge of the discussions.
Bain declined, this person said, speaking anonymously to discuss private negotiations.
This is an especially serious matter because the very foundation of Romney’s candidacy is his vaunted business acumen.  If he really believed that private funding existed for managed bankruptcies of these two companies, then he based that belief on something other than fact, something other than evidence.  And if, as is likely, he well knew that no private funding would be available, and that without government funding these companies’ bankruptcies would be liquidations, then why was he claiming otherwise?

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A final (for now) comment on Romney’s virulent hostility toward the UAW (and organized labor in general, and union members)

Late Tuesday night, a Washington-based blogger for The Economist who covers U.S. politics posted a several-paragraph takedown of Romney’s op-ed published that morning in the Detroit News.  I learned of the op-ed yesterday when I read a then-two—day-old entry about it by Matthew Yglesias (not a favorite of mine, but I’ll leave that subject for another post) on Slate’s Moneybox blog. The key paragraphs of the Economist post are:

The purpose of Mr Romney’s op-ed is to clarify his position on the auto bail-out ahead of Michigan’s primary on February 28th. And the piece rivals Cirque du Soleil in its display of contortions. Mr Romney seems loth to gush about the success of the bail-out, noting only the good news that “Chrysler and General Motors are still in business”. He certainly doesn’t mention that 2011 was the best year for America’s carmakers since the financial crisis, with each of the big three turning a solid profit. But he does imply that this achievement is a result of his own advice. “The course I recommended was eventually followed”, Mr Romney writes.

As with much of Mr Romney’s excessive rhetoric, there is some truth to this statement. Following the bail-outs, the president eventually forced Chrysler and GM into bankruptcy, a step Mr Romney thought should occur naturally. And the government oversaw painful restructurings at both companies, which were largely in line with Mr Romney’s broad suggestions. But the course Mr Romney recommended in 2008 began with the government stepping back, and it is unlikely things would’ve turned out so well had this happened.

Free-marketeers that we are, The Economist agreed with Mr Romney at the time. But we later apologised for that position. “Had the government not stepped in, GM might have restructured under normal bankruptcy procedures, without putting public money at risk”, we said. But “given the panic that gripped private purse-strings…it is more likely that GM would have been liquidated, sending a cascade of destruction through the supply chain on which its rivals, too, depended.” Even Ford, which avoided bankruptcy, feared the industry would collapse if GM went down. At the time that seemed like a real possibility. The credit markets were bone-dry, making the privately financed bankruptcy that Mr Romney favoured improbable. He conveniently ignores this bit of history in claiming to have been right all along.

But the next paragraph, the final one in the post, begins:

In other areas of his op-ed Mr Romney is more accurate. Unions did win some special favours in the bail-out deals, though they are not as egregious as the candidate claims. For example, a health fund for retired workers was unfairly favoured over secured bondholders at Chrysler.

Forgive me if I’m missing something here, but why, exactly, was it unfair for the Obama administration to force the favoring of a health fund for retired workers over secured bondholders at Chrysler in the government-funded restructuring of that company?  Don’t bondholders take the risk of default when they purchase the bonds?  Don’t investors risk losing all or part of their investment when they invest?  Isn’t that an inherent part of capitalism?

And while it’s true that in bankruptcy proceedings, pension and other retirement-benefit agreements, including those negotiated in labor agreements, can be dissolved or significantly altered, why—considering that retirement benefits are given as deferred payment for the workers’ labor—is it unfair for a government that is funding a “managed” bankruptcy to favor a health fund for retired workers over bondholders?

This strikes me as at the very heart of what Mitt Romney is about: his bald preference for government policy that favors the wealthy over everyone else.  Santorum probably will win the primary in Michigan and the primary in Ohio a week later.  But what will put him over the top in these rustbelt states is not the social conservatives but instead blue-collar voters whose primary (and general-election) concern (yes, pun intended), is economic policy. 

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Clarification (my final one, I hope)

I just want to clarify again that the title of my original post, “Breaking news: Bain Capital wanted to lend money to GM and Chrysler for managed bankruptcies,” was intended as facetious, and that I had no idea that there was a recent report, rescinded as it turns out, that Bain Capital had been involved somehow in discussions with the Obama administration about the auto bailouts in early 2009.  Much less did I know that Bain Consulting apparently did advise the Obama administration concerning whether to go forward with the auto bailouts that the Bush administration had set in motion.   (Formally advised the Obama administration? At the request of the Obama administration? I have no idea.)

The point of that first post was to highlight that while Romney apparently has been claiming that Chrysler and GM could, have found private funding for “managed” bankruptcies (and that this somehow would have resulted in no layoffs, or fewer layoffs, or something), the absolutely clear truth, as both the Bush administration official and the Obama administration officials involved in the auto bailouts, have said all along, there was no private funding available to finance these huge restructurings, and so without the government bailouts these bankruptcies would have been liquidations.  Bain Capital is a venture capital operation, yet it did not offer to fund managed bankruptcies for these companies.  Either did any other private-investment company.

The title of that post was supposed to highlight that Romney’s claim is false. There was no private capital available, from Bain Capital or Goldman Sachs or any other firm, for “managed” bankruptcies of these companies—bankruptcies that would have allowed these companies to remain operational and recover.  My second post, “BREAKING NEWS: Bain Capital Really, Really, REALLY Did Not Want to Lend GM and Chrysler Money For Their Managed Bankruptcies!*”, which discussed Bain Capital’s PR agent’s email to Dan, explained this.  Or tried to.

But here’s another clarification: As several commenters to my posts have pointed out, Bain Capital and Bain Consulting are not as unrelated as Bain PR agent Lusk wants y’all to think.  They’re separate legal entities, and Bain Consulting, unlike Bain Capital, does not actually buy companies, in highly-leveraged purchases or otherwise, and restructure them.  Instead, they just sorta, I guess, arrange for others to do that.  Still, these two companies are … oh, I don’t know …second cousins, once removed?

Meanwhile, on the other subject of my posts of the last few days: Romney’s weird ad playing on the local evening news shows here in Michigan, in which he incoherently attacks Obama, as per “the liberals’” demands, he says, for negotiating with the UAW and obtaining only those union concessions necessary to allow these companies to emerge from bankruptcy and become profitable again?  According to an article in yesterday’s Washington Post, Which I read last night, Romney’s been making virulently anti-organized-labor, and especially anti-UW, statements a regular part of his speeches at campaign stops throughout Michigan in the last week or so, because he thinks Tea Partiers are anti-labor and, in Michigan, are especially anti-UAW. 

Ooookay. So this guy, who made more than $200 million running a “restructuring” venture capital company, thinks a virulently anti-organized-labor stance will help him get elected president, when his chosen Exhibit A is a union whose members made large concessions in order to keep their employer companies afloat and whose employer companies are now very profitable under the revised union agreements.

My only fear is that in the general election, Obama won’t point this out.  Although the unions will.  And if news coverage of the primary campaign in Michigan this week is any indication, so will the news media.

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Romney Ad in Michigan Advances “Liberal” Policy. Really.

As Bain Capital PR agent Charlyn Lusk (see my post from yesterday morning) and other AB readers know by now, I’ve posted a series of posts here over the last few days that discuss the oddity that Mitt Romney has repeatedly claimed whenever the subject of the auto company bailouts arises, that, while, yes, he had in fact argued against the government bailouts for the two companies, and had written a New York Times op-ed saying that a government bailout would spell the end of the auto industry in the U.S.—apparently on the presumption that up is down and down is up—he had argued for an alternative that would have been better: managed bankruptcy.

My posts, and now reporters here in Michigan covering Romney’s campaign stops in the state—see my post from last evening, and the corrected final sentence of it—point out that, Romney’s comments notwithstanding, the companies did file for bankruptcy.  My first post on this, prompted by a new Romney op-ed, this one in the Detroit News, mentioned that thanks to government funding of the process (a.k.a., the bailouts), the bankruptcies were managed ones, which enabled both companies to emerge from the bankruptcy process much smaller but intact. 

My posts also noted that, Romney’s claims to the contrary, there was no private funding available to fund these managed bankruptcies.  And that in any event, the solution that Romney claims to have suggested—private-equity loans backed by government guarantees for those loans—would not have saved any public money.  It would, however, have handed the keys to the U.S. auto industry to private-equity firms. And in a bizarre ad running on local TV news programs here in Michigan, Romney makes startlingly clear what the difference would have been, and why he so objects to the government’s bailout of the two companies.

The result of the bailouts are indisputable, and Romney no longer attempts to dispute them: Hundreds of thousands of jobs in the auto industry were saved, the companies are now successful, and both are hiring again in order to add plant shifts.  He did, though, claim without explanation in his Detroit News op-ed that the wrong workers’ jobs were saved.  I.e., union jobs, a theme he advances in the TV spot.

The titles of my earlier posts in this series were intended as sarcasm.  The title of this post is not. This ad is among the oddest I’ve ever seen, and among the most revealing. In last evening’s post, I described it as a weird, incoherent ad that “actually hints at the elimination-of-union-workers thing, while actually advertising that ‘liberals’ got ‘Obama’ to save the auto industry. Seriously.”

Seriously. The ad begins with photos of from the 1950s.  One is of an AMC car of that era, another of Romney as a child, with his father at the Detroit Auto Show, circa late ‘50s.  Romney is the narrator, and talks of his lifelong love of the Detroit auto industry.  Then, abruptly, there’s the current Romney, driving a car down a residential street in a Detroit neighborhood, talking about how great it is that the auto industry is coming back to life.  But as he’s driving, he suddenly says something like, “Obama gave the liberals everything they wanted” in the auto bailout. 

Like what, exactly? The unions gave huge concessions in exchange for the bailout.  Huge concessions. In any event, the concessions were enough to allow the two companies to thrive less than three years later, and for one of them, GM, to regain its place, from Toyota, as the leading auto company in the world. It announced record profits yesterday, after the ad was made and shown repeatedly, but GM’s success has been clear for some months now.

So what’s Romney’s problem with the bailouts? Bruce Webb summarized it well, I think, in a lengthy comment to my post of last evening:

On a serious note Romney in his statements about Obama selling out to unions makes it clear that his definition of “managed bankruptcy” is narrowly focused on Bain (Capital not Consulting) style bankruptcies that include ripping up union contracts and stripping pension funds to leave a “leaner, meaner” company whose interests are 150% aligned with the shareholders.  …
That is Romney sees two different fors of ‘managed bankruptcy’, one that attempts to reach Pragmatic/Utilitarian Greatest Good outcomes, and another that attempts to maximize returns on capital and sees the former as inherently illegitimate. Morally. Obama by allowing labor to be a stakeholder as opposed to 100% privileging capital was to that degree a traitor.  

Adding it all up, that does seem accurate.  And it’s hard to imagine a nicer hat tip to liberal policies than Romney’s acknowledgment that the current success of GM and Chrysler, and, correspondingly, the suddenly enlivened economy of Michigan at least, and probably of Ohio (another big auto- and auto-supplier manufacturing hub) too is due to Obama’s caving into all the liberals’ demands.  GM announced bonuses of up to $7,000 for most of its blue-collar workforce yesterday.

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