In what often seems to be a neverending battle between financial institutions on one side and regulators on the other, it seems that both sides have found a bit of common ground as they come together in an attempt to avert future financial meltdowns. Although details are at this point non-existent, and though it is likely going to be some time before anything solid is in effect, many in the financial industry voiced support this week for some form of a global insurance scheme whose goal would be the avoidance of taxpayer bailouts in the event that a key cog in the financial machinery needed to be saved.
This seems to be a sensible solution to the 'too big to fail' problem whereby certain financial institutions become so entangled with others that the collapse of one would creat a domino effect that would impact the whole system. During the recent crisis, the solution was government interference, probably inevitable, but also undesirable in a capitalist system and with taxpayers footing the bill.
1.29.2010
The Unfortunate Result of Today's Terry Privacy Case Decision
One interesting aspect of the Tiger Woods scandal was the lack of concern anyone seemed to have for privacy concerns once the initial story broke. Both entertainment and 'real' media latched on to every juicy detail, posting pictures of alleged conquests, speculating on details of potential divorce settlements, and drilling ever deeper into the minutiae of the most personal of family issues. Indeed, during celebrity scandals in particular, the ubiquitous presence and role of the media is so unquestioned that its intrusion into personal affairs rarely merits discussion. As Americans, we are as conditioned to getting our daily fix of celebrity gossip as we are to our morning coffee. However, the role of media in America is worth discussing at times, particularly in a comparative sense. Indeed, in some jurisdictions, rather than resting upon a foundation of First Amendment rights, journalists acting as they do here would more likely to find themselves in prison or writing large checks. There are some places where privacy laws provide protections for the rich and famous, particularly when they are going through their most embarassing of situations.
Until today, a list of such jurisdictions could have included England, where, though gossip pages are as voracious as their New World counterparts, judicial activism had recently tempered the the potential impact of a few particularly salacious cases. Despite the lack of a mandate from Parliament to cover up such situations, some judges were going out of their way to ensure that some, most notably footballers, were able to cover up their affairs in a sort of 'back door privacy' move involving injunctions which pre-empted reports on dalliances. This line of judicial decisions stemmed out of an interpretation of the Human Rights Act of 1998, and has frustrated the media on several occasions. In the latest example, reports over the weekend claimed that one player had used a 'super-injunction' to prevent details of his affair with a former teammate's girlfriend from appearing in the weekend papers. Many had criticised that original decision to impose an injunction, saying it was another instance of anonymity being granted “willy nilly” by the courts to enable the rich to prevent negative publicity.
However, in a ruling that reflects the feelings of the majority of the public and echoes comments recently made by members of Commons, a judge ruled today that the super-injunction England and Chelsea captain John Terry had gained in his fight to keep reports of his affair with his mate's then-girlfriend was not necessary. In his reversal-decision, Mr Justice Tugendhat said that the previous injunction was “not necessary or proportionate having regard to the level of gravity of interference with the private life of the applicant”, and added that “the nub of the applicant’s complaint is to protect his reputation, in particular with sponsors.” Notably, in addtion to his £7 million/year wages, Terry earns millions from sponsorship deals dependant on his public image.
Though many, among them newspaper editors, will applaud the move by the courts, and though it may come closest to reflecting the current state of legislative law in England, it is worth noting the price being paid in this situation. Terry is risking millions of pounds per year in sponsorships, the captaincy of his country, at least one important friendship, and potentially his wife and twins. It is difficult to feel too bad for this long-time playboy however, as he has brought this situation upon himself. More sympathetic characters in the story include his young family and former teammate Wayne Bridge, who are all reportedly, and understandably, devastated over the situation. Despite the unquestionably legal basis for the decision, it is difficult in these types of situations to truly feel that justice has been served when the innocent victims are the ones who end up being the most deeply hurt.
Until today, a list of such jurisdictions could have included England, where, though gossip pages are as voracious as their New World counterparts, judicial activism had recently tempered the the potential impact of a few particularly salacious cases. Despite the lack of a mandate from Parliament to cover up such situations, some judges were going out of their way to ensure that some, most notably footballers, were able to cover up their affairs in a sort of 'back door privacy' move involving injunctions which pre-empted reports on dalliances. This line of judicial decisions stemmed out of an interpretation of the Human Rights Act of 1998, and has frustrated the media on several occasions. In the latest example, reports over the weekend claimed that one player had used a 'super-injunction' to prevent details of his affair with a former teammate's girlfriend from appearing in the weekend papers. Many had criticised that original decision to impose an injunction, saying it was another instance of anonymity being granted “willy nilly” by the courts to enable the rich to prevent negative publicity.
However, in a ruling that reflects the feelings of the majority of the public and echoes comments recently made by members of Commons, a judge ruled today that the super-injunction England and Chelsea captain John Terry had gained in his fight to keep reports of his affair with his mate's then-girlfriend was not necessary. In his reversal-decision, Mr Justice Tugendhat said that the previous injunction was “not necessary or proportionate having regard to the level of gravity of interference with the private life of the applicant”, and added that “the nub of the applicant’s complaint is to protect his reputation, in particular with sponsors.” Notably, in addtion to his £7 million/year wages, Terry earns millions from sponsorship deals dependant on his public image.
Though many, among them newspaper editors, will applaud the move by the courts, and though it may come closest to reflecting the current state of legislative law in England, it is worth noting the price being paid in this situation. Terry is risking millions of pounds per year in sponsorships, the captaincy of his country, at least one important friendship, and potentially his wife and twins. It is difficult to feel too bad for this long-time playboy however, as he has brought this situation upon himself. More sympathetic characters in the story include his young family and former teammate Wayne Bridge, who are all reportedly, and understandably, devastated over the situation. Despite the unquestionably legal basis for the decision, it is difficult in these types of situations to truly feel that justice has been served when the innocent victims are the ones who end up being the most deeply hurt.
1.28.2010
Interesting Wiretap Issues Arise in Galleon Insider Trading Case
The enormous Galleon insider trading case, seen by many as a muscle-flexing excercise by the SEC after the failings exposed by the Bernie Madoff scandal, has created some very interesting issues with wiretapping as civil and criminal cases have overlapped both temporally and substantively. Traders at Galleon have been accused of reaping over $20 million in illegal insider-trading profits, leading to both a Justice Department criminal case and an SEC civil case. As part of its investigation, the Justice Department tapped the defendants to gain evidence of possible illegal behavior, then shared this evidence with the defense teams once the investigation was in process. The SEC now hopes to acquire these tapes as part of pretrial discovery, a move which may be critical if it hopes to put together a winning case.
In the wake of the Madoff scandal, and as stories began to surface suggesting that the SEC had been alerted about the Ponzi scheme going back to the beginning of the decade, the agency was keen to get its hands on a winning case. In Galleon, it believes that it has found one. However, as noted, a succesful claim may rest on evidence which it does not currently have. What is interesting about its request for the tapes is that it presents a novel legal question; namely, in the absence of statutory clarity, can wiretap evidence gained during a criminal investigation and which has not been admitted during trial be discovered and utilized in the context of a civil trial.
This is essentially a question of privacy rights of defendants vs. the ability of the government to use all of the tools at its disposal to prevent and/or punish wrongful behavior. And the ruling could have far reaching implications, with among the most extreme being an increase in the use of surveillance by the government in white collar criminal cases. This is not a tool that has been utilized in the past, however it is one which regulatory agencies would obviously love to have access to. Although it may seem sensible to fight crime using all the most state-of-the-art tools, there are also costs involved and constitutional rights to consider. As counsel for Raj Rajaratnam, the founder of Galleon, said in a statement, "Mr. Rajaratnam's constitutional right to defend himself in (the criminal) case does not create an independent discovery right by the SEC."
Diligent layman viewers of Law & Order, dazzled by in-court performances, sometimes miss the idea that it is often what happens before a trial starts that makes the most impact on its final result. The upcoming wiretapping ruling is a great example, as the SEC might not have a case without the benefit of this critical piece of evidence. Likewise, fans of Sam Waterston and friends probably don't realize that rulings in trials often impact the future far more than they do the case then at bar. Galleon also provides a great example of this assertion, as a ruling for the SEC could impact the entire strategy of securities regulators in identifying and punishing insider traders going forward. It is difficult to say what the right decision is, as balancing the arguments of both sides seems to leave the scales of justice roughly even. However, what is not difficult is envisioning the far-reaching impact that the ruling could have either way it comes out.
In the wake of the Madoff scandal, and as stories began to surface suggesting that the SEC had been alerted about the Ponzi scheme going back to the beginning of the decade, the agency was keen to get its hands on a winning case. In Galleon, it believes that it has found one. However, as noted, a succesful claim may rest on evidence which it does not currently have. What is interesting about its request for the tapes is that it presents a novel legal question; namely, in the absence of statutory clarity, can wiretap evidence gained during a criminal investigation and which has not been admitted during trial be discovered and utilized in the context of a civil trial.
This is essentially a question of privacy rights of defendants vs. the ability of the government to use all of the tools at its disposal to prevent and/or punish wrongful behavior. And the ruling could have far reaching implications, with among the most extreme being an increase in the use of surveillance by the government in white collar criminal cases. This is not a tool that has been utilized in the past, however it is one which regulatory agencies would obviously love to have access to. Although it may seem sensible to fight crime using all the most state-of-the-art tools, there are also costs involved and constitutional rights to consider. As counsel for Raj Rajaratnam, the founder of Galleon, said in a statement, "Mr. Rajaratnam's constitutional right to defend himself in (the criminal) case does not create an independent discovery right by the SEC."
Diligent layman viewers of Law & Order, dazzled by in-court performances, sometimes miss the idea that it is often what happens before a trial starts that makes the most impact on its final result. The upcoming wiretapping ruling is a great example, as the SEC might not have a case without the benefit of this critical piece of evidence. Likewise, fans of Sam Waterston and friends probably don't realize that rulings in trials often impact the future far more than they do the case then at bar. Galleon also provides a great example of this assertion, as a ruling for the SEC could impact the entire strategy of securities regulators in identifying and punishing insider traders going forward. It is difficult to say what the right decision is, as balancing the arguments of both sides seems to leave the scales of justice roughly even. However, what is not difficult is envisioning the far-reaching impact that the ruling could have either way it comes out.
1.26.2010
The Case for Giving Bernanke Four More Years
Blawgconomics has noted the precarious position of Fed Chairman Ben Bernanke in the past. Recent reports suggest that he is not quite out of hot water yet.
Despite the endorsement of President Obama in the form of a re-nomination as well as some (perhaps tenuous) support from congresssional leadership, Bernanke, being, whether fairly or note, the public face of the recession, is facing an uphill battle on his road to a second term. Notably, unlike past grumbling about Fed nominations, it is not only the Ron Pauls of the world who are debating the pick, but also such high profile pols as John McCain who are joining the fray.
While Bernanke probably has enough support to ultimately gain his re-appointment, and while he is probably too personally identified with an economic meltdown that was not of his making, the dissenting voices could cause some delay in the process. And, interestingly, if Bernanke is not reconfirmed before his term is up, that would lead to Donald Kohn taking the reins. Though this would not really mean any type of shift in internal Fed policy as Kohn often mirrors Bernanke when it comes to interest rate policy, it would signal a further erosion of the persuasive powers of the current President, a phenomenon which was on full display during the recent special election in Massachusetts.
There are many current issues in politics today where the minority should, and does, have a powerful voice. This ensures that the most extreme views are tempered and sometimes leads to compromises which are more broadly beneficial than any one view of a matter. However, in the humble opinion of Blawgconomics, the re-appointment of Bernanke is one particular area the dissenting voices of politics should tread carefully. As the old adage starts, be careful what you wish for. In this case, that means that blocking Bernanke would lead to confusion, uncertainty, and perhaps ultimately, a worse position than we currently find ourselves in.
Ben Bernanke has done a good job in an awful situation. His Fed has reacted quickly and aggressively in trying to keep a financial meltdown in check. Though some measures (particularly those taken on behalf of the Executive) went too far in what is supposed to be a capitalist society, and though current rate policies may be creating a whole new set of problems, Bernanke is still the best man for a thankless job. Not only that, but it is unclear who else would be as qualified as him in the current situation and with so many balls in the air. Of course continuity for the sake of continuity is hardly ever the best strategy, in politics or so many other aspects of life. However, in the absence of another clear-cut, highly qualified candidate, there is something to be said for playing who got us here. Ultimately, the Chairman will likely gain a second term. And, those in power are right to question his past moves, his present strategies, and his future plans. However, in the best case, reality will set in sooner than later and the minority will put its issues aside for the time being in the interest of moving forward on recovery.
Despite the endorsement of President Obama in the form of a re-nomination as well as some (perhaps tenuous) support from congresssional leadership, Bernanke, being, whether fairly or note, the public face of the recession, is facing an uphill battle on his road to a second term. Notably, unlike past grumbling about Fed nominations, it is not only the Ron Pauls of the world who are debating the pick, but also such high profile pols as John McCain who are joining the fray.
While Bernanke probably has enough support to ultimately gain his re-appointment, and while he is probably too personally identified with an economic meltdown that was not of his making, the dissenting voices could cause some delay in the process. And, interestingly, if Bernanke is not reconfirmed before his term is up, that would lead to Donald Kohn taking the reins. Though this would not really mean any type of shift in internal Fed policy as Kohn often mirrors Bernanke when it comes to interest rate policy, it would signal a further erosion of the persuasive powers of the current President, a phenomenon which was on full display during the recent special election in Massachusetts.
There are many current issues in politics today where the minority should, and does, have a powerful voice. This ensures that the most extreme views are tempered and sometimes leads to compromises which are more broadly beneficial than any one view of a matter. However, in the humble opinion of Blawgconomics, the re-appointment of Bernanke is one particular area the dissenting voices of politics should tread carefully. As the old adage starts, be careful what you wish for. In this case, that means that blocking Bernanke would lead to confusion, uncertainty, and perhaps ultimately, a worse position than we currently find ourselves in.
Ben Bernanke has done a good job in an awful situation. His Fed has reacted quickly and aggressively in trying to keep a financial meltdown in check. Though some measures (particularly those taken on behalf of the Executive) went too far in what is supposed to be a capitalist society, and though current rate policies may be creating a whole new set of problems, Bernanke is still the best man for a thankless job. Not only that, but it is unclear who else would be as qualified as him in the current situation and with so many balls in the air. Of course continuity for the sake of continuity is hardly ever the best strategy, in politics or so many other aspects of life. However, in the absence of another clear-cut, highly qualified candidate, there is something to be said for playing who got us here. Ultimately, the Chairman will likely gain a second term. And, those in power are right to question his past moves, his present strategies, and his future plans. However, in the best case, reality will set in sooner than later and the minority will put its issues aside for the time being in the interest of moving forward on recovery.
1.25.2010
Summarizing the New FAA Manufacturing and Airworthiness Guidelines
The FAA recently finalized the latest version of its rules for airworthiness and component manufacturing. This situation presents an interesting case study in the cross section of the legal and economic worlds as many of members of industry impacted by the revisions to the existing rules claimed during the commenting period that the costs of the proposed rules would be prohibitive. Though the FAA clearly took a number of industrial complaints under advisement, it still managed to update certain safety standards. Following is a summary of the main changes.
Starting April 14, 2010, the Federal Aviation Administration (FAA) will begin to utilize a new set of certification procedures and identification requirements for aeronautical products and articles. These changes are being promulgated after a nearly four year comment and revision process embarked upon in 2006, and despite the objections of some in the industry who believe some of the changes to be cost prohibitive. The updates will impact production approval holders (PAHs) and manufacturers, with the stated goals being promotion of safety and to better reflect the current global aircraft industry operating environment.
In addition to clarifying certain existing rules and definitions, as well as describing updates to permitting and compliance procedures, the rules contain two changes to the current system that manufacturers in the airline industry should be particularly aware of due to their impact and contentious nature. These include; 1) new requirements for the marking of parts for identification purposes, and 2) new quality control procedures. Notably, two areas of great concern to the industry which the FAA had originally proposed changes to, namely issuance of airworthiness certificates and the addition of certification staff, were left unchanged in the final proposal due to lack of impact on safety and overwhelming potential costs.
Until now, the FAA had only required that parts, and not their individual components, be marked. Although not as sweeping as originally had been planned, the FAA has nonetheless made changes to this rule. Now, PAHs must also mark sub-assemblies and component parts if they leave their facilities as separate articles. These must include the manufacturer’s part number and name, trademark, symbol, or other FAA-approved PAH identification (e.g.,the production approval number, cage code, or Federal supply code for manufacturers (FSCM)). According to the FAA, this is a codification of current industry standards and is less stringent that proposed requirements, which would have included the marking of every component.
Prior to now, PAHs were auditing under various requirements based on the individual parts being produced. Under the new rules, the FAA has attempted to standardize auditing requirements, making them more uniform for all producers. According to the FAA, this is the result of a combination of best practices, ISO standards, and a combination of other sources including other aviation safety authorities. Some of the requirements include procedures for controlling use of design data, tests for design conformity, and rules for scrap parts, among others. For specific guidance on how to construct compliant quality control systems, the FAA will provide additional information on the internet site http://www.faa.gov.
Starting April 14, 2010, the Federal Aviation Administration (FAA) will begin to utilize a new set of certification procedures and identification requirements for aeronautical products and articles. These changes are being promulgated after a nearly four year comment and revision process embarked upon in 2006, and despite the objections of some in the industry who believe some of the changes to be cost prohibitive. The updates will impact production approval holders (PAHs) and manufacturers, with the stated goals being promotion of safety and to better reflect the current global aircraft industry operating environment.
In addition to clarifying certain existing rules and definitions, as well as describing updates to permitting and compliance procedures, the rules contain two changes to the current system that manufacturers in the airline industry should be particularly aware of due to their impact and contentious nature. These include; 1) new requirements for the marking of parts for identification purposes, and 2) new quality control procedures. Notably, two areas of great concern to the industry which the FAA had originally proposed changes to, namely issuance of airworthiness certificates and the addition of certification staff, were left unchanged in the final proposal due to lack of impact on safety and overwhelming potential costs.
Until now, the FAA had only required that parts, and not their individual components, be marked. Although not as sweeping as originally had been planned, the FAA has nonetheless made changes to this rule. Now, PAHs must also mark sub-assemblies and component parts if they leave their facilities as separate articles. These must include the manufacturer’s part number and name, trademark, symbol, or other FAA-approved PAH identification (e.g.,the production approval number, cage code, or Federal supply code for manufacturers (FSCM)). According to the FAA, this is a codification of current industry standards and is less stringent that proposed requirements, which would have included the marking of every component.
Prior to now, PAHs were auditing under various requirements based on the individual parts being produced. Under the new rules, the FAA has attempted to standardize auditing requirements, making them more uniform for all producers. According to the FAA, this is the result of a combination of best practices, ISO standards, and a combination of other sources including other aviation safety authorities. Some of the requirements include procedures for controlling use of design data, tests for design conformity, and rules for scrap parts, among others. For specific guidance on how to construct compliant quality control systems, the FAA will provide additional information on the internet site http://www.faa.gov.
1.22.2010
Missed Opportunities in Lucas v. The Forty-Fourth General Assembly of the State of Colorado
The judicial thicket of apportionment has, despite its many perils, stimulated some very reasonable solutions. Unfortunately, the foremost among these came in the form of a dissent penned by Justice Stewart in the Lucas case of 1964. After years of first ignoring the justiciability of districting questions based on Guaranty Clause concerns, then comparatively overreaching its powers using a series of Fourteenth Amendment-based cases, the Supreme Court could have easily chosen the Lucas case and Justice Stewart’s opinion to bring balance to the question of districting. However, it continued to overlook common sense solutions to admittedly complex issues and instead continued upon of path of utilizing ‘sixth-grade arithmetic’ with detrimental consequences.
Stewart’s 14th Amendment-based two pronged test, which equally weighed the needs of the states with protections for the majority would have not only neatly displaced the problems of previous decisions, but would have embraced the best ideas of a democratic system. While it is perhaps axiomatic that no realistic system will ever completely rid the election process of ills such as extreme gerrymandering or disproportionate vote values, Stewart’s test was the best effort by a justice to that point to combine the intricacies of local politics with proper emphasis on the republican rights of the electorate.
Though it cannot be forgotten that early apportionment cases such as Colegrove occurred during a time when views of judicial power were very different from those of today, courts’ handling of such cases left the electoral process prone to even the most blatant abuse. In his opinion, Frankfurter did a better job than later justices in recognizing that simply declaring the system of a state as invalid didn’t solve an inherent problem. However, at the same time he ignored the great inadequacies of the Illinois system, whereby some votes were essentially eight to nine times as potent as others. Simply calling apportionment a political question meant that entrenched politicians and a minority of citizens could essentially control their parties’ destiny and interests.
The same issue of apportionment arose again in 1963 when the Court heard Baker v. Carr. Here, however, instead of declaring that such issues were non-justiciable due to their political nature under the Guaranty Clause, the court drifted all the way to the other end of the spectrum in an opinion by Justice Brennan. Brennan adopted a Fourteenth Amendment Equal Protection argument to declare that Tennessee’s apportionment scheme was insufficient, wresting dominion over the question from the realm of pure politics and forever changing the role of the court in apportionment cases. However, in doing so, Brennan offered no preferred remedy, possibly recognizing Justice Harlan’s earlier concerns of judicial impotence in matters of state’s rights. Notably, despite concurring in the case, Stewart foreshadowed his future dissent in Lucas by trying to limit the scope of the decision. However, Brennan’s views prevailed, placing the judiciary squarely in Justice Frankfurter’s political thicket.
Perhaps the best defense of judicial interference in the apportionment decisions of states came from Chief Justice Warren in his decision in Reynolds v. Sims. There, a passionate defense of the role of the judiciary in cases of invidious discrimination was made in ruling that a state could not have an apportionment scheme for its bicameral system roughly equivalent to that of the U.S. government. Though his ignoring of local issues was aptly critiqued by Justice Harlan in his dissent, Warren did recognize the value of votes to individuals, and his concerns regarding the ills of discrimination were more artful than those voiced in the past. These concerns provided half the composition of Stewart’s later test. For his part, Harlan’s defense of the viewpoint that considered economic, historic, geographic and majority concerns of states presaged the other half of the framework Stewart built upon in Lucas.
Lucas was presented to the court the same year as Reynolds, and it was once again the Chief Justice who took responsibility for writing the opinion of the majority. In Lucas, the court was presented with a novel question in its line of apportionment cases. The state of Colorado had a system that resulted in a disproportionate voting, an approach which had already been discussed and rejected by previous courts. However, several wrinkles differentiated the Colorado scheme from some of those which had been rejected in the past. For one, Colorado utilized referenda for questions such as reapportionment, and it was by such a vote that the disputed scheme was in place. Further, the divisions within the state had been reapportioned roughly once every decade dating back to the 1880’s. Finally, the state itself was able to justify its scheme, not just reasonably, but completely believably. Of note, the state includes several mountainous regions which are very difficult to travel to. There are also several pockets of areas which are primarily tourist destinations. This lead to the proposal of regional districts which sometimes lead to disproportionate voting weights, but which was nonetheless explicitly sanctioned by the very people it was supposedly disenfranchising.
In his opinion, Chief Justice Warren continued to advocate for the equality of votes, and in the process, ignored what may very well have been best for the state. There was no discrimination claimed in Colorado; Warren merely took the best parts of his previous opinion and applied them to the situation at hand. Such a blind adherence to his own precedent provoked Justice Stewart to proclaim upon dissenting that he,
Rather than merely criticizing Warren however, and in addition to adding a few notable phrases to the judicial phrasebook along the way, Stewart proposed a common sense approach to the apportionment question. To Stewart, similarly to Warren, discrimination, or ‘frustration against the will of a majority,’ must be stopped. This was an admission that the courts had more responsibility in the question than Harlan was ever willing to accept. However, on top of Warren’s unyielding protection of majority rights, Stewart seized upon the benefits of the Colorado system, and Harlan's earlier analysis, and added a prong mandating courts to weigh whether a state’s characteristics and needs might allow it to adopt a rational plan which did not strictly adhere to the principles of ‘sixth-grade math.’ This proposed two prong balancing test was simple, sensible and effective. It captured the best of the both Warren and Harlan’s views of protection and state’s rights respectively, and would have nipped more problems in the bud that it would have created.
If Stewart’s approach had been adopted, it would have meant that invidious discrimination would have been protected against and that the voice of the majority would not have been ignored. At the same time, his two prong test would have shown deference to the local politicians and indeed citizens of States that the justices might never have even visited. Instead, common sense was put to the side for the sake of stare decisis in a clear cut case of precedent overruling the best solution to a problem. This adherence to precedent had far reaching repercussions impacting such derided practices as extreme gerrymandering which continue to this day. Stewart's test would not have solved every problem, and it is naive to believe that those with a stake in the status quo would always behave honorably. However, when the judiciary finds itself in political thickets, the best strategy is to always adopt sensible rules with wide applicability. In Lucas the Court failed to do so.
Stewart’s 14th Amendment-based two pronged test, which equally weighed the needs of the states with protections for the majority would have not only neatly displaced the problems of previous decisions, but would have embraced the best ideas of a democratic system. While it is perhaps axiomatic that no realistic system will ever completely rid the election process of ills such as extreme gerrymandering or disproportionate vote values, Stewart’s test was the best effort by a justice to that point to combine the intricacies of local politics with proper emphasis on the republican rights of the electorate.
Though it cannot be forgotten that early apportionment cases such as Colegrove occurred during a time when views of judicial power were very different from those of today, courts’ handling of such cases left the electoral process prone to even the most blatant abuse. In his opinion, Frankfurter did a better job than later justices in recognizing that simply declaring the system of a state as invalid didn’t solve an inherent problem. However, at the same time he ignored the great inadequacies of the Illinois system, whereby some votes were essentially eight to nine times as potent as others. Simply calling apportionment a political question meant that entrenched politicians and a minority of citizens could essentially control their parties’ destiny and interests.
The same issue of apportionment arose again in 1963 when the Court heard Baker v. Carr. Here, however, instead of declaring that such issues were non-justiciable due to their political nature under the Guaranty Clause, the court drifted all the way to the other end of the spectrum in an opinion by Justice Brennan. Brennan adopted a Fourteenth Amendment Equal Protection argument to declare that Tennessee’s apportionment scheme was insufficient, wresting dominion over the question from the realm of pure politics and forever changing the role of the court in apportionment cases. However, in doing so, Brennan offered no preferred remedy, possibly recognizing Justice Harlan’s earlier concerns of judicial impotence in matters of state’s rights. Notably, despite concurring in the case, Stewart foreshadowed his future dissent in Lucas by trying to limit the scope of the decision. However, Brennan’s views prevailed, placing the judiciary squarely in Justice Frankfurter’s political thicket.
Perhaps the best defense of judicial interference in the apportionment decisions of states came from Chief Justice Warren in his decision in Reynolds v. Sims. There, a passionate defense of the role of the judiciary in cases of invidious discrimination was made in ruling that a state could not have an apportionment scheme for its bicameral system roughly equivalent to that of the U.S. government. Though his ignoring of local issues was aptly critiqued by Justice Harlan in his dissent, Warren did recognize the value of votes to individuals, and his concerns regarding the ills of discrimination were more artful than those voiced in the past. These concerns provided half the composition of Stewart’s later test. For his part, Harlan’s defense of the viewpoint that considered economic, historic, geographic and majority concerns of states presaged the other half of the framework Stewart built upon in Lucas.
Lucas was presented to the court the same year as Reynolds, and it was once again the Chief Justice who took responsibility for writing the opinion of the majority. In Lucas, the court was presented with a novel question in its line of apportionment cases. The state of Colorado had a system that resulted in a disproportionate voting, an approach which had already been discussed and rejected by previous courts. However, several wrinkles differentiated the Colorado scheme from some of those which had been rejected in the past. For one, Colorado utilized referenda for questions such as reapportionment, and it was by such a vote that the disputed scheme was in place. Further, the divisions within the state had been reapportioned roughly once every decade dating back to the 1880’s. Finally, the state itself was able to justify its scheme, not just reasonably, but completely believably. Of note, the state includes several mountainous regions which are very difficult to travel to. There are also several pockets of areas which are primarily tourist destinations. This lead to the proposal of regional districts which sometimes lead to disproportionate voting weights, but which was nonetheless explicitly sanctioned by the very people it was supposedly disenfranchising.
In his opinion, Chief Justice Warren continued to advocate for the equality of votes, and in the process, ignored what may very well have been best for the state. There was no discrimination claimed in Colorado; Warren merely took the best parts of his previous opinion and applied them to the situation at hand. Such a blind adherence to his own precedent provoked Justice Stewart to proclaim upon dissenting that he,
‘…could not join in the fabrication of a constitutional mandate which imports and forever freezes one theory of political thought into our Constitution, and forever denies to every State any opportunity for enlightened and progressive innovation in the design of its democratic institutions, so as to accommodate within a system of representative government the interests and aspirations of diverse groups of people, without subjecting any group or class to absolute domination by a geographically concentrated or highly organized majority.’
Rather than merely criticizing Warren however, and in addition to adding a few notable phrases to the judicial phrasebook along the way, Stewart proposed a common sense approach to the apportionment question. To Stewart, similarly to Warren, discrimination, or ‘frustration against the will of a majority,’ must be stopped. This was an admission that the courts had more responsibility in the question than Harlan was ever willing to accept. However, on top of Warren’s unyielding protection of majority rights, Stewart seized upon the benefits of the Colorado system, and Harlan's earlier analysis, and added a prong mandating courts to weigh whether a state’s characteristics and needs might allow it to adopt a rational plan which did not strictly adhere to the principles of ‘sixth-grade math.’ This proposed two prong balancing test was simple, sensible and effective. It captured the best of the both Warren and Harlan’s views of protection and state’s rights respectively, and would have nipped more problems in the bud that it would have created.
If Stewart’s approach had been adopted, it would have meant that invidious discrimination would have been protected against and that the voice of the majority would not have been ignored. At the same time, his two prong test would have shown deference to the local politicians and indeed citizens of States that the justices might never have even visited. Instead, common sense was put to the side for the sake of stare decisis in a clear cut case of precedent overruling the best solution to a problem. This adherence to precedent had far reaching repercussions impacting such derided practices as extreme gerrymandering which continue to this day. Stewart's test would not have solved every problem, and it is naive to believe that those with a stake in the status quo would always behave honorably. However, when the judiciary finds itself in political thickets, the best strategy is to always adopt sensible rules with wide applicability. In Lucas the Court failed to do so.
1.15.2010
IEA January Oil Market Report
Posted a little later in the month than usual, possibly due to the holiday rush, IEA released its January Oil Market Report today. The biggest news of the month has been the rise in oil prices with abnormally low temperatures globally and tensions in the Middle East serving as the stimulus. However, it is anticipated that medium- to long-term demand will continue to be more greatly impacted by the economic slowdown than weather or geopolitical concerns.
1.12.2010
European Energy Flows
For anyone curious about how energy trade occurs in Europe, the IEA has created an interactive map with some interesting tools.
One of the more interesting aspects of this map is the overwhelming integration of the continent as well as different states' dependence upon each other for resources. This system typically works well, but has also been known to create some geo-political issues, notably between Russia and several of its former satellites.
One of the more interesting aspects of this map is the overwhelming integration of the continent as well as different states' dependence upon each other for resources. This system typically works well, but has also been known to create some geo-political issues, notably between Russia and several of its former satellites.
1.11.2010
The Case for Climate Change Curiousity
For some time now, many have declared that the 'debate has been settled' on the topic of climate change. Oftentimes, those rallying around this notion adopt something approaching a 'you are either with us or against us' attitude toward anyone who claims to be sceptical about some of the scientific data that 'proves' climate change. On the other hand, there are still deniers, that, perhaps as a defense mechanism and however illogically, have adopted the attitude that nothing man does has an impact on the environment, whether it is cutting down rainforests, polluting waterways, or putting smog into the air.
In reality, both sides are likely too extreme in their views. The impact of poisoning the water we drink and air we breathe is unquestionable. At the same time, the power of the earth's systems to self-heal and repair themselves is tremendous. Many scientists claim that data has proven that the climate is changing. However, others dispute this, and due to 'Climategate,' even what was considered to be unbiased data has come into question. Many leaders on the international stage claim that they are believers in climate change, while lack of domestic support renders them impotent. The climate has undeniably been changing since the Earth was formed, but with absolutely no help from our species for substantially most of that time. It is also unclear what exactly impact myriad changes to carbon emissions standards now and in the future will have on warming trends. With so many questions unanswered, and so many debates outstanding, why is it so wrong to be undecided about what some call the greatest issue of our time?
Just like everyone who is a sceptic should read publications such as the IEA World Energy Outlook, true believers should make sure they read material such as this article by David Rose outlining the position of some top scientists that we are entering a cooling cycle similar to those the Earth has entered every few decades over the past century. By taking a look at both positions, the public can best inform themselves about all of the views about the topic, and not rely on hot air-spewing primetime commentators on either side of the debate for their opinions. This should not be a Republican v. Democrat debate, nor a Fox News v. MSNBC argument.
To be curious or perhaps sceptical about climate change is not to be a denier. It is simply to believe that this is not an area of settled science. Mere decimal place changes to projected data make projected outcomes vary wildly, and there is not even one settled model that can definitively prove what will happen next week nevermind next year or next decade. Scientists know more about the surface of the moon than they do about all of the factors that impact the climate. And with the legal, political, and financial changes required to impose some of the restrictions many advocate for being nearly incalculable, it should be a more socially acceptable option to be curious about climate change.
This is not to say that nothing should be done now. Clearly deforestation needs to be curbed, with proper management taking its place and ensuring that timber is a renewable resource. Incentives need to exist to reduce pollution, if for no other reason than to curb the tangible impacts of smog and acid rain. Reliance on fossil fuels needs to be reduced; such dependance is a security threat for importers and it is undeniable that, someday, the planet will run out of coal and oil. Finally, for efficiency sake, money needs to be spent on initiatives such as Smart Grid, which will make the economy more productive while reducing oil use and increasing security. All of these initiatives are positives for those who believe man is destroying the planet while also making sense from a completely neutral standpoint. They also all ultimately reduce net costs in one way or another while allowing the incomes and standards of living for all to increase. This should allow those nations who are still playing catch-up with the developed world to continue on an upward path.
The world is changing. It always has and always will. There are many data points discussed by scientists with many potential outcomes. Being curious about this, and making oneself informed of all of the information available does not mean that someone is opposed to change. It also does not mean that someone is a denier of man's impact on the world. For example, no one considering themselves curious would stop thinking about the climate debate merely because we are in the midst of a record-cold winter. However, many of the changes advocated for by some are great departures from current practices, and at the very least deserve further debate before legal structures and international agreements are changed, enormous financial burdens are taken on, and the quality of life of billions is impacted. In the meantime, leaders should do their jobs and work to make their constituents better off. This can be accomplished by creating a healthier world with more efficient economies that positively impact the greatest amount of people. There are many uncontroversial measures that can be taken to ensure this while what some still consider to be an unsettled debate continues.
In reality, both sides are likely too extreme in their views. The impact of poisoning the water we drink and air we breathe is unquestionable. At the same time, the power of the earth's systems to self-heal and repair themselves is tremendous. Many scientists claim that data has proven that the climate is changing. However, others dispute this, and due to 'Climategate,' even what was considered to be unbiased data has come into question. Many leaders on the international stage claim that they are believers in climate change, while lack of domestic support renders them impotent. The climate has undeniably been changing since the Earth was formed, but with absolutely no help from our species for substantially most of that time. It is also unclear what exactly impact myriad changes to carbon emissions standards now and in the future will have on warming trends. With so many questions unanswered, and so many debates outstanding, why is it so wrong to be undecided about what some call the greatest issue of our time?
Just like everyone who is a sceptic should read publications such as the IEA World Energy Outlook, true believers should make sure they read material such as this article by David Rose outlining the position of some top scientists that we are entering a cooling cycle similar to those the Earth has entered every few decades over the past century. By taking a look at both positions, the public can best inform themselves about all of the views about the topic, and not rely on hot air-spewing primetime commentators on either side of the debate for their opinions. This should not be a Republican v. Democrat debate, nor a Fox News v. MSNBC argument.
To be curious or perhaps sceptical about climate change is not to be a denier. It is simply to believe that this is not an area of settled science. Mere decimal place changes to projected data make projected outcomes vary wildly, and there is not even one settled model that can definitively prove what will happen next week nevermind next year or next decade. Scientists know more about the surface of the moon than they do about all of the factors that impact the climate. And with the legal, political, and financial changes required to impose some of the restrictions many advocate for being nearly incalculable, it should be a more socially acceptable option to be curious about climate change.
This is not to say that nothing should be done now. Clearly deforestation needs to be curbed, with proper management taking its place and ensuring that timber is a renewable resource. Incentives need to exist to reduce pollution, if for no other reason than to curb the tangible impacts of smog and acid rain. Reliance on fossil fuels needs to be reduced; such dependance is a security threat for importers and it is undeniable that, someday, the planet will run out of coal and oil. Finally, for efficiency sake, money needs to be spent on initiatives such as Smart Grid, which will make the economy more productive while reducing oil use and increasing security. All of these initiatives are positives for those who believe man is destroying the planet while also making sense from a completely neutral standpoint. They also all ultimately reduce net costs in one way or another while allowing the incomes and standards of living for all to increase. This should allow those nations who are still playing catch-up with the developed world to continue on an upward path.
The world is changing. It always has and always will. There are many data points discussed by scientists with many potential outcomes. Being curious about this, and making oneself informed of all of the information available does not mean that someone is opposed to change. It also does not mean that someone is a denier of man's impact on the world. For example, no one considering themselves curious would stop thinking about the climate debate merely because we are in the midst of a record-cold winter. However, many of the changes advocated for by some are great departures from current practices, and at the very least deserve further debate before legal structures and international agreements are changed, enormous financial burdens are taken on, and the quality of life of billions is impacted. In the meantime, leaders should do their jobs and work to make their constituents better off. This can be accomplished by creating a healthier world with more efficient economies that positively impact the greatest amount of people. There are many uncontroversial measures that can be taken to ensure this while what some still consider to be an unsettled debate continues.
1.09.2010
Both Sides Need to Make Concessions to Avoid Disaster in MLS Labor Dispute
Among many fans of international soccer, the MLS, or Major League Soccer, is perhaps best known as the league David Beckham plays in when he is not lacing up for Milan. The quality of the league and the state of soccer in America provide continuous fodder for discussion on internet chat boards and in pubs around the world. However, the fact of the matter is that the MLS specifically, and more broadly soccer in the States, are in a stronger position than ever.
MLS is in its best-ever financial condition, and the league is coming off of a Cup Final featuring its two marquee names, Landon Donovan and Beckham. Stars, including some very close to their respective primes, have begun to see MLS as a real option as they consider their futures. And younger players no longer see the league as a hindrance to their career development as more and more top talents are moving seamlessly to top European leagues directly from America. Additionally, after some hickups in the late nineties and early 2000's, the league has resumed expansion, with new franchises recently being awarded to Philadelphia, Vancouver and Portland. More broadly, US Soccer is in a strong position, coming off last year's runner-up finish in the Confederations Cup and ahead of a tantalizing matchup with England to kick off its World Cup campaign in a return trip to South Africa this summer. Looking ahead to the future, changing demographics in the States point to even greater growth potential for the sport as new arrivals from south of the border with a far greater interest in futbol than football represent an ever growing component in the melting pot that is America.
All of these reasons and more point to an imperative need for MLS players and owners to settle their current labor dispute amicably and avoid a crippling work stoppage, either due to strike or lockout, at the end of this month. At issue are several points, none of which will sound unfamiliar to observers of labor negotiations. Players claim that the pay situation in the league is unfair, dislike the lack of guarantees in contracts, and claim that the league is a cartel which reduces their ability to get fair contracts. On the other side, the league, despite recent success, can point to the fact that most teams still lose money and the tenuous nature of the league itself as reasons behind their lack of willingness to budge. Ownership can point, for example to the failed US soccer leagues of the past, such as the NASL, which famously overextended itself to bring in stars such as Pele and Beckenbauer. However, despite differences, a resolution before the January 31st expiration of the current contract should be the goal of all involved as stakeholders in a venture that could just as easily fail as continue its current course of success.
The history of labor stoppages in US sports leagues should guide the parties in the dispute. Recent examples from much more established leagues, for example, should emphasize the risks of a stoppage. Labor issues in Major League Baseball in the mid 90's disillusioned many fans and allowed professional football to supplant baseball as the national pastime in many Americans' eyes. Attendance dropped as a result, and only recovered during what was, in retrospect, a steroid-fuelled, decade-long, in-game home run derby. More recently, the NHL has failed to fully recover from its season-cancelling 2004-05 lockout, during which, even in Canada, fans turned to other options.
Despite very legitimate grievances expressed by the players (for example, income for MLS players averaged $147,945 at the start of last season, according to the MLS union, but the median was $88,000 for 323 players listed, obviously far lower than the median in other US sports leagues or other global soccer leagues) the league has most of the power in the dispute for two reasons. For one, FIFA, the world governing body of the sport, has given its blessing to the single-entity structure of the league, claiming that it is a labor issue under US law, and not a violation of its own guidelines. Secondly, it has already been settled in the US court system that the MLS system is not an illegal cartel, mainly because players have the option to play in leagues all around the world. The logic behind this decision has only strengthened with the proliferation of US-born players seeking their fortunes abroad (though how this might be impacted by the Supreme Court after hearing oral arguments in the American Needle case next week is not exactly clear.) Therefore, the structure of the league, which exists as one entity that negotiates contracts of players and handles decision making, albeit with input from a few powerful owners, has been validated by both the governing body of global soccer and by national law, making it nearly impossible to crack.
At the same time, and despite great power, the league needs to recognize that concessions will be necessary to stimulate further interest, and therefore growth in the league. A median income of less than $90,000 per season is not enough to attract top foreign talent in large numbers, nor is it enough to retain top young, US born talent. This is, in part, why many twentysomething Americans find themselves in places such as Greece and Denmark. True, Europe is a dream destination for many soccer players growing up in the US, but if you aren't in a country such as England, Germany or Spain, among a few select others, it is more likely financial considerations than career development that drive the decision to cross the pond. The league has made some strides on the salary front with the advent of the designated player slot, also known as the rule change making it feasible to bring Beckham to Los Angeles. However, there have been rumblings that even this backfired after some players on the regular payscale noticed the discrepencies.
Ultimately, it may be that to make money is going to take money. It doesn't take a statistician to note the impact that Galaxy, with stars Beckham and Donovan, make upon attendance numbers. This is because these marquee players attract crowds. Notably, the Galaxy, despite spending big money on star salaries, are one of the few teams in the league that can claim they are profitable. Increasing median salaries will make it easier to retain talent, keep that talent satisfied despite the higher salaries of designated players, and attract foreign talent in higher numbers. All of these will have the obvious impact of increasing the level of play, attracting larger crowds, and ultimately, driving success on and off the field.
Both sides in the MLS labor dispute need to be realistic in the coming weeks if they are to avoid a disastrous work stoppage. With the benefit of being able to look into the past and see the crippling effect of labor stoppages in more established leagues in what are frankly more popular sports, the reality of the situation should not be difficult for either side to understand. Included in this reality are the fact that the league has most of the power, the fact that players are what drive the success of the league. When both sides understand these main points, it will hopefully drive them to come to a mutually beneficial conclusion. Hopefully, for the sake of soccer in the United States, this happens sooner than later.
MLS is in its best-ever financial condition, and the league is coming off of a Cup Final featuring its two marquee names, Landon Donovan and Beckham. Stars, including some very close to their respective primes, have begun to see MLS as a real option as they consider their futures. And younger players no longer see the league as a hindrance to their career development as more and more top talents are moving seamlessly to top European leagues directly from America. Additionally, after some hickups in the late nineties and early 2000's, the league has resumed expansion, with new franchises recently being awarded to Philadelphia, Vancouver and Portland. More broadly, US Soccer is in a strong position, coming off last year's runner-up finish in the Confederations Cup and ahead of a tantalizing matchup with England to kick off its World Cup campaign in a return trip to South Africa this summer. Looking ahead to the future, changing demographics in the States point to even greater growth potential for the sport as new arrivals from south of the border with a far greater interest in futbol than football represent an ever growing component in the melting pot that is America.
All of these reasons and more point to an imperative need for MLS players and owners to settle their current labor dispute amicably and avoid a crippling work stoppage, either due to strike or lockout, at the end of this month. At issue are several points, none of which will sound unfamiliar to observers of labor negotiations. Players claim that the pay situation in the league is unfair, dislike the lack of guarantees in contracts, and claim that the league is a cartel which reduces their ability to get fair contracts. On the other side, the league, despite recent success, can point to the fact that most teams still lose money and the tenuous nature of the league itself as reasons behind their lack of willingness to budge. Ownership can point, for example to the failed US soccer leagues of the past, such as the NASL, which famously overextended itself to bring in stars such as Pele and Beckenbauer. However, despite differences, a resolution before the January 31st expiration of the current contract should be the goal of all involved as stakeholders in a venture that could just as easily fail as continue its current course of success.
The history of labor stoppages in US sports leagues should guide the parties in the dispute. Recent examples from much more established leagues, for example, should emphasize the risks of a stoppage. Labor issues in Major League Baseball in the mid 90's disillusioned many fans and allowed professional football to supplant baseball as the national pastime in many Americans' eyes. Attendance dropped as a result, and only recovered during what was, in retrospect, a steroid-fuelled, decade-long, in-game home run derby. More recently, the NHL has failed to fully recover from its season-cancelling 2004-05 lockout, during which, even in Canada, fans turned to other options.
Despite very legitimate grievances expressed by the players (for example, income for MLS players averaged $147,945 at the start of last season, according to the MLS union, but the median was $88,000 for 323 players listed, obviously far lower than the median in other US sports leagues or other global soccer leagues) the league has most of the power in the dispute for two reasons. For one, FIFA, the world governing body of the sport, has given its blessing to the single-entity structure of the league, claiming that it is a labor issue under US law, and not a violation of its own guidelines. Secondly, it has already been settled in the US court system that the MLS system is not an illegal cartel, mainly because players have the option to play in leagues all around the world. The logic behind this decision has only strengthened with the proliferation of US-born players seeking their fortunes abroad (though how this might be impacted by the Supreme Court after hearing oral arguments in the American Needle case next week is not exactly clear.) Therefore, the structure of the league, which exists as one entity that negotiates contracts of players and handles decision making, albeit with input from a few powerful owners, has been validated by both the governing body of global soccer and by national law, making it nearly impossible to crack.
At the same time, and despite great power, the league needs to recognize that concessions will be necessary to stimulate further interest, and therefore growth in the league. A median income of less than $90,000 per season is not enough to attract top foreign talent in large numbers, nor is it enough to retain top young, US born talent. This is, in part, why many twentysomething Americans find themselves in places such as Greece and Denmark. True, Europe is a dream destination for many soccer players growing up in the US, but if you aren't in a country such as England, Germany or Spain, among a few select others, it is more likely financial considerations than career development that drive the decision to cross the pond. The league has made some strides on the salary front with the advent of the designated player slot, also known as the rule change making it feasible to bring Beckham to Los Angeles. However, there have been rumblings that even this backfired after some players on the regular payscale noticed the discrepencies.
Ultimately, it may be that to make money is going to take money. It doesn't take a statistician to note the impact that Galaxy, with stars Beckham and Donovan, make upon attendance numbers. This is because these marquee players attract crowds. Notably, the Galaxy, despite spending big money on star salaries, are one of the few teams in the league that can claim they are profitable. Increasing median salaries will make it easier to retain talent, keep that talent satisfied despite the higher salaries of designated players, and attract foreign talent in higher numbers. All of these will have the obvious impact of increasing the level of play, attracting larger crowds, and ultimately, driving success on and off the field.
Both sides in the MLS labor dispute need to be realistic in the coming weeks if they are to avoid a disastrous work stoppage. With the benefit of being able to look into the past and see the crippling effect of labor stoppages in more established leagues in what are frankly more popular sports, the reality of the situation should not be difficult for either side to understand. Included in this reality are the fact that the league has most of the power, the fact that players are what drive the success of the league. When both sides understand these main points, it will hopefully drive them to come to a mutually beneficial conclusion. Hopefully, for the sake of soccer in the United States, this happens sooner than later.
1.07.2010
The Status of the Legal Industry
This Washingtonian article is well worth a read for anyone connected to, or interested in entering, the legal profession.
Health Care Negotiations Should be Opened to Public View
In the long-running debate over health care, it is worth noting that a government-run plan is not the only 'public option' which has potentially met its demise. The other has been the public's option to be well informed about the development of the legislation and to weigh-in on what is sure to be a bill with far-ranging and incredibly long-term consequences. Despite numerous promises of transparency, the current leadership of the Democratic party has shut out the public. And, as noted in this Washington Times editorial, that is not only alienating the public, but is swelling the ranks of those who count themselves against the bill.
In an era when mistrust of elected officials runs rampant, and where any final deal will be scrutinized thoroughly despite its purposefully intimidating length, it only makes sense for Democratic leadership to open talks up to the public view. Particularly when one considers that liberals have enough votes to ensure passage of a final bill without Republican support, and considering the levels of protest when the bills were coming through their respective houses, more openness should be embraced by the Democrats as a method of bringing independents and whatever Conservatives they can into their fold. This would result in provisions more acceptable to the general public as well as greater pre-passage consensus on what appears to be an inevitable law. It would also be a means to diffuse the criticisms of the bill that seem to be so stinging to Democratic leadership and open them up to the most abuse.
For example, if there are no 'death panels,' don't simply claim they don't exist, explain what panels are intended to do. If the public isn't funding abortions, explain how abortions are impacted by the bill. If there is no longer a public option, show us what the alternative is. As has been seen in many Supreme Court cases, the intent of lawmakers, made known via the eventual printing of committee and floor reports, matters. Therefore, Congress should let the public know what that intent is before it demands public fealty or expects dissent to decline.
However, instead of using numerical superiority as a means to embrace outside views and even, at the bare minimum, pay lip service to transparency, Democrats are using their strength as a wall to shut out opposition and outsiders in a game of politics as usual. It appears that the party is resting so many hopes on health care reform (and perhaps with the reality of polls setting in) that it seems to be willing to strategically give up seats in the House and Senate to ensure passage. One analogy this brings to mind is that of a wounded and cornered animal with nothing to lose; it will do whatever it can to get what it wants, whether survive, or in this case, pass a bill that, despite its potential to solve a real problem, has become weighed down by rumors, secrecy and misinterpretation in a bog of unpopularity.
No issue in recent memory, not even the Iraq war, was as divisive even in nascent stages as this health care reform bill has proven to be. Shutting the public out is not the solution to this, but is more fuel to the fire of an already vocal opposition. Whatever law the current congressional negotiations result in will represent a historic moment for the US. What side of history Democrats come out on is yet to be determined. With rare control over, yet a fading opportunity, to determine its fate, the party should do what it can to earn its desired status as a majority party of consensus rather than of secrecy and divisiveness.
In an era when mistrust of elected officials runs rampant, and where any final deal will be scrutinized thoroughly despite its purposefully intimidating length, it only makes sense for Democratic leadership to open talks up to the public view. Particularly when one considers that liberals have enough votes to ensure passage of a final bill without Republican support, and considering the levels of protest when the bills were coming through their respective houses, more openness should be embraced by the Democrats as a method of bringing independents and whatever Conservatives they can into their fold. This would result in provisions more acceptable to the general public as well as greater pre-passage consensus on what appears to be an inevitable law. It would also be a means to diffuse the criticisms of the bill that seem to be so stinging to Democratic leadership and open them up to the most abuse.
For example, if there are no 'death panels,' don't simply claim they don't exist, explain what panels are intended to do. If the public isn't funding abortions, explain how abortions are impacted by the bill. If there is no longer a public option, show us what the alternative is. As has been seen in many Supreme Court cases, the intent of lawmakers, made known via the eventual printing of committee and floor reports, matters. Therefore, Congress should let the public know what that intent is before it demands public fealty or expects dissent to decline.
However, instead of using numerical superiority as a means to embrace outside views and even, at the bare minimum, pay lip service to transparency, Democrats are using their strength as a wall to shut out opposition and outsiders in a game of politics as usual. It appears that the party is resting so many hopes on health care reform (and perhaps with the reality of polls setting in) that it seems to be willing to strategically give up seats in the House and Senate to ensure passage. One analogy this brings to mind is that of a wounded and cornered animal with nothing to lose; it will do whatever it can to get what it wants, whether survive, or in this case, pass a bill that, despite its potential to solve a real problem, has become weighed down by rumors, secrecy and misinterpretation in a bog of unpopularity.
No issue in recent memory, not even the Iraq war, was as divisive even in nascent stages as this health care reform bill has proven to be. Shutting the public out is not the solution to this, but is more fuel to the fire of an already vocal opposition. Whatever law the current congressional negotiations result in will represent a historic moment for the US. What side of history Democrats come out on is yet to be determined. With rare control over, yet a fading opportunity, to determine its fate, the party should do what it can to earn its desired status as a majority party of consensus rather than of secrecy and divisiveness.
1.05.2010
Short-Sighted Icelandic Referendum Ignores Probable Repurcussions
With a decision to put the repayment status of sovereign financial obligations to a referendum, Icelandic President Olafur Ragnar Grimsson is weakly succumbing to the voices of the mob rather than following reason and common sense. The island nation of about 300,000 currently owes the UK and The Netherlands about $5 billion in the aftermath of economic and currency collapse and resulting bailouts and loans. Though the Icelandic parliament has put forward legislation that would result in the return of loans to creditors, Grimsson has hesitated to put his pen to the paper in the face of opposition from citizens as approximately a quarter of the population have signed a petition with the aim of scrapping the bill. While the burden on each citizen is high at over $15,000 per capita, and while it may not seem fair to many to pay for the sins of a failed bank, the implications of a short-sighted no vote would be far ranging and incredibly damaging to a country trying to get its economy and way of life back to relative normalcy.
Iceland is already working with the IMF on its issues, but the fund is not likely to continue assisting it if loans are defaulted on. Additionally, other countries, particularly Nordic neighbors, will be increasingly weary in dealings with Iceland and loathe to loan additional and much-needed funds. Finally, any hopes of EU membership would surely be swiftly dashed in the face of default. Such loss of lifelines and resources would put the country in even more of a precarious position than it is already in, with the repurcussions likely reverberating for at least a generation. Though elected representatives should listen to the voice of the people, it is also true that they have a responsibility to make difficult, and sometimes unpopular decisions, when necessary.
Once the government nationalized Landsbanki in 2008, it became the responsibility, for better or worse, of all Iceland's citizens. Refusing to meet the obligations of the bank, and therefore the nation, will result in almost incalculable harm to the reputation and future economic prospects of the recovering state. Hopefully the signatures on the petition urging lawmakers to abandon repayment plans represent the sum of all citizens opposed to the plan, in other words a vocal (albeit very vocal) minority. If this is the case, there is still a chance that the referendum could result in a payback. Otherwise, a very short-sighted citizenry and president will be doing not only short-term, but also very long-term damage to the prospects of a struggling nation.
Iceland is already working with the IMF on its issues, but the fund is not likely to continue assisting it if loans are defaulted on. Additionally, other countries, particularly Nordic neighbors, will be increasingly weary in dealings with Iceland and loathe to loan additional and much-needed funds. Finally, any hopes of EU membership would surely be swiftly dashed in the face of default. Such loss of lifelines and resources would put the country in even more of a precarious position than it is already in, with the repurcussions likely reverberating for at least a generation. Though elected representatives should listen to the voice of the people, it is also true that they have a responsibility to make difficult, and sometimes unpopular decisions, when necessary.
Once the government nationalized Landsbanki in 2008, it became the responsibility, for better or worse, of all Iceland's citizens. Refusing to meet the obligations of the bank, and therefore the nation, will result in almost incalculable harm to the reputation and future economic prospects of the recovering state. Hopefully the signatures on the petition urging lawmakers to abandon repayment plans represent the sum of all citizens opposed to the plan, in other words a vocal (albeit very vocal) minority. If this is the case, there is still a chance that the referendum could result in a payback. Otherwise, a very short-sighted citizenry and president will be doing not only short-term, but also very long-term damage to the prospects of a struggling nation.
1.03.2010
Pittsburgh; Where Common Sense Happens
Though the news is about two weeks old, the resolution in Pittsburgh of a stand-off between the mayor's office and the city's 11 universities represents a commendable yet sadly rare bit of common sense out of the political world. Until an agreement by the universities to increase 'voluntary payments' to the city was made on December 21, the mayor had threatened to add a 1% tuition tax to the fees of students attending school in the city. However, by dropping the threat to put the tax to a vote, the mayor resisted an urge to solve a short-term budget problem with a idea that made little long-term economic sense.
The threat, though perhaps made simply as a bargaining chip after the schools had initially refused to increase their voluntary payments, represented one of the worst examples of political problem solving in some time, and would have resulted only in detrimental effects to both students and city. Students contribute greatly to a community, both directly and indirectly. For example, though universities have exemptions on some property taxes, they do pay other fees and provide citizens with well-paid and steady jobs. Students spend money in the community, provide buoyancy to the rental market, and provide cheap labor for area businesses. Long- term, quality universities also results in a better-trained, more educated work force, important particularly for a city trying save an economy held down for years under the crushing weight of a failed steel industry. Any additions to already sky-high tuitions and expenses would have been the best way to push high-quality students away, and are completely contrary to a strategy of attracting and retaining quality additions to a transforming work force.
Though it is not particularly clear what the voluntary payments will amount to, where they will come from, or whether they are actually a tax on students that will simply be disguised as higher tuition fees down the road, the abandonment of this tax plan seems, for the moment, to be a bit of common sense. Here's hoping the decision goes on to head a list of trends, rather than exceptions, in the new year.
The threat, though perhaps made simply as a bargaining chip after the schools had initially refused to increase their voluntary payments, represented one of the worst examples of political problem solving in some time, and would have resulted only in detrimental effects to both students and city. Students contribute greatly to a community, both directly and indirectly. For example, though universities have exemptions on some property taxes, they do pay other fees and provide citizens with well-paid and steady jobs. Students spend money in the community, provide buoyancy to the rental market, and provide cheap labor for area businesses. Long- term, quality universities also results in a better-trained, more educated work force, important particularly for a city trying save an economy held down for years under the crushing weight of a failed steel industry. Any additions to already sky-high tuitions and expenses would have been the best way to push high-quality students away, and are completely contrary to a strategy of attracting and retaining quality additions to a transforming work force.
Though it is not particularly clear what the voluntary payments will amount to, where they will come from, or whether they are actually a tax on students that will simply be disguised as higher tuition fees down the road, the abandonment of this tax plan seems, for the moment, to be a bit of common sense. Here's hoping the decision goes on to head a list of trends, rather than exceptions, in the new year.
1.02.2010
Interest Rate Indecision in 2010 Could Make 2009 Look Like 'The Good Old Times'
Notwithstanding a good friend's spring 2009 prediction that inflation would hit double digits by February 2010, prices have been relatively tame over the past year, kept in check by reduced demand for fuel and goods in a recessionary environment. However, one of the biggest questions of the new year, assuming optimistically that both corporate and consumer spending continue and that unemployment drops, is the following; what will be the result of running the Treasury's printing presses non-stop over the past year as the US government attempted to avoid the worst of a banking crisis?
A classic result of printing money is the onset of inflation. As a stated goal of the keepers of the US economy is to avoid inflationary pressures, it is possible that a few options will be discussed, however, given the current state of things, not all of them are feasible. For example, at this point, it would appear that fiscal measures are out of the question, as reduced spending is not likely to be the cornerstone of economic policy in an election year and as stimulus has been so touted as a key to success by the current administration. Additionally, it does not seem likely that the Treasury will stop printing money.
Therefore, the answer to the above question depends in large part on the future plans of the Fed. Though it cannot actually ease further, as interest rates are just about as low as they can possibly be in their current range, the Fed can continue to keep rates as they are, a move akin to loosening monetary policy. This will ultimately have an inflationary impact, as money supply remains high. The other move that could be made would be to increase interest rates, a strategy bound to be unpopular among those who believe we are in the nascent throes of recovery as well as Democratic incumbents gearing up for critical election fights during the year.
However, there is a saying that gets thrown around in law school that 'easy cases make bad law,' a statement which can easily be re-written for use in this case as easy financial decisions lead to a bad economy. Here, this would mean raising rates now despite the minimal pain it would cause in order to avoid disaster in the future. Such action would have the impact of marginally reducing the money supply, and thus any excess liquidity by increasing the savings rate. The effect would be a curb on inflationary pressures. More importantly, it would also allow the Fed to maintain greater future control of the economy, despite being a difficult sell for short-sighted politicians.
Ben Bernanke should do everything in his power to convince lawmakers that measure tightening is the best course of action for the economy. Pointing to the not so distant past could be one strategy. Notably, a prolonged period of low rates in the late nineties, and more consequentially in the early 2000's, created by the 'wizardry' of Alan Greenspan, lead directly to the housing bubbles and the current malaise. Though the currently easing cycle was critical in the fight to stave off crisis, and the rapidity and creativity of reactionary solutions promulgated by the Fed in the face of collapse were commendable, the wait and see approach currently being taken by the bank is the yeast in the fermentation process of future asset bubbles and inflationary pressures. Bernanke, a student of the great depression, should certainly be able to see this, and is hopefully only waiting for a few economic triggers to put a tightening strategy in place.
Though this may seem counterintuitive while unemployment is still high, there is plenty of room to move on interest rates before they become inhibitive to corporate spending and thus hiring. Additionally, the alternatives could prove to be much more disastrous. China, for example, has been making a lot of noise regarding its inability to absorb much more US debt going forward, understandable considering the astronomical wealth it has tied up in US assets. Other nations are bound to reduce purchases of Treasury assets as well, due to the fact that with decreased US corporate spending, the pool of dollars available to purchase dollar-based assets has shrunk recently. Though this may seem odd since so much money has been printed over the past year, one must consider that a large portion of that went to merely shoring up battered balance sheets and bailing out money pits in Detroit. Finally, the stated desire of OPEC nations to reduce reliance upon the dollar is yet another concern in the current climate.
The fact that it is currently so easy for the US to sell debt even at marginal rates of return is directly due to the dollar's status as the global currency of exchange as well as the relative safety of the investment. However, if, for the above reasons and others, foreigners were to reduce the rate at which they purchase US debt, it could be disastrous for the US economy. Initially, the government would have a very difficult time putting some of its current plans, such as healthcare, into place. Therefore, it would need to take fiscal measures to increase revenue and borrowing. This means, for one, higher taxes with their detrimental impact on both corporate and consumer spending. Additionally, in order to entice further lending, the US would ultimately need to raise rates dramatically in the future, rather than at a measured rate now, offering a premium to get investors to bite. This would result in a much more rapid tightening process than either the Fed or corporate America would be happy with at just the time that spending is slowing down, conditions which could easily lead to deflationary pressures. And, with liquidity already high and stimulus out of the question, the government and Fed would have few tools available to fight such forces. Higher rates now would work to ward off inflationary pressures and avoid the disastrous impact of the faucet of lending to the US being shut off completely.
Though a tough sell politically, it is likely that efforts to keep rates low now will simply mean higher taxes and rates in the future, and ultimately an externally enforced, rather than an internally imposed, tightening. Then, fears of deflation could replace current concerns about inflation as the main evil of the day. To stave off future pain, the Fed will have to swallow the bitter pills of measured rate hikes. Otherwise the US economy will unfortunately have more to fear than 10% unemployment.
A classic result of printing money is the onset of inflation. As a stated goal of the keepers of the US economy is to avoid inflationary pressures, it is possible that a few options will be discussed, however, given the current state of things, not all of them are feasible. For example, at this point, it would appear that fiscal measures are out of the question, as reduced spending is not likely to be the cornerstone of economic policy in an election year and as stimulus has been so touted as a key to success by the current administration. Additionally, it does not seem likely that the Treasury will stop printing money.
Therefore, the answer to the above question depends in large part on the future plans of the Fed. Though it cannot actually ease further, as interest rates are just about as low as they can possibly be in their current range, the Fed can continue to keep rates as they are, a move akin to loosening monetary policy. This will ultimately have an inflationary impact, as money supply remains high. The other move that could be made would be to increase interest rates, a strategy bound to be unpopular among those who believe we are in the nascent throes of recovery as well as Democratic incumbents gearing up for critical election fights during the year.
However, there is a saying that gets thrown around in law school that 'easy cases make bad law,' a statement which can easily be re-written for use in this case as easy financial decisions lead to a bad economy. Here, this would mean raising rates now despite the minimal pain it would cause in order to avoid disaster in the future. Such action would have the impact of marginally reducing the money supply, and thus any excess liquidity by increasing the savings rate. The effect would be a curb on inflationary pressures. More importantly, it would also allow the Fed to maintain greater future control of the economy, despite being a difficult sell for short-sighted politicians.
Ben Bernanke should do everything in his power to convince lawmakers that measure tightening is the best course of action for the economy. Pointing to the not so distant past could be one strategy. Notably, a prolonged period of low rates in the late nineties, and more consequentially in the early 2000's, created by the 'wizardry' of Alan Greenspan, lead directly to the housing bubbles and the current malaise. Though the currently easing cycle was critical in the fight to stave off crisis, and the rapidity and creativity of reactionary solutions promulgated by the Fed in the face of collapse were commendable, the wait and see approach currently being taken by the bank is the yeast in the fermentation process of future asset bubbles and inflationary pressures. Bernanke, a student of the great depression, should certainly be able to see this, and is hopefully only waiting for a few economic triggers to put a tightening strategy in place.
Though this may seem counterintuitive while unemployment is still high, there is plenty of room to move on interest rates before they become inhibitive to corporate spending and thus hiring. Additionally, the alternatives could prove to be much more disastrous. China, for example, has been making a lot of noise regarding its inability to absorb much more US debt going forward, understandable considering the astronomical wealth it has tied up in US assets. Other nations are bound to reduce purchases of Treasury assets as well, due to the fact that with decreased US corporate spending, the pool of dollars available to purchase dollar-based assets has shrunk recently. Though this may seem odd since so much money has been printed over the past year, one must consider that a large portion of that went to merely shoring up battered balance sheets and bailing out money pits in Detroit. Finally, the stated desire of OPEC nations to reduce reliance upon the dollar is yet another concern in the current climate.
The fact that it is currently so easy for the US to sell debt even at marginal rates of return is directly due to the dollar's status as the global currency of exchange as well as the relative safety of the investment. However, if, for the above reasons and others, foreigners were to reduce the rate at which they purchase US debt, it could be disastrous for the US economy. Initially, the government would have a very difficult time putting some of its current plans, such as healthcare, into place. Therefore, it would need to take fiscal measures to increase revenue and borrowing. This means, for one, higher taxes with their detrimental impact on both corporate and consumer spending. Additionally, in order to entice further lending, the US would ultimately need to raise rates dramatically in the future, rather than at a measured rate now, offering a premium to get investors to bite. This would result in a much more rapid tightening process than either the Fed or corporate America would be happy with at just the time that spending is slowing down, conditions which could easily lead to deflationary pressures. And, with liquidity already high and stimulus out of the question, the government and Fed would have few tools available to fight such forces. Higher rates now would work to ward off inflationary pressures and avoid the disastrous impact of the faucet of lending to the US being shut off completely.
Though a tough sell politically, it is likely that efforts to keep rates low now will simply mean higher taxes and rates in the future, and ultimately an externally enforced, rather than an internally imposed, tightening. Then, fears of deflation could replace current concerns about inflation as the main evil of the day. To stave off future pain, the Fed will have to swallow the bitter pills of measured rate hikes. Otherwise the US economy will unfortunately have more to fear than 10% unemployment.
1.01.2010
Some Reasons to be Optimistic Entering a New Year
Fueling the joy that accompanies the beginning of a new year is a perhaps naive optimism that the troubles of the previous twelve months are being left behind, as if the clock striking 12 on January 1 is a catharsis rather than just a simple flip of a calendar page. Were it only so; with jobless numbers still hitting double digits in the US and the repercussions of the financial crisis still reverberating through both the halls of Congress and the alleys of downtown Manhattan, many hesitate to embrace hopes that 2010 will indeed signal a fresh start.
However, despite these concerns and its practice of taking a daily serving of realism, BlawgConomics sees reasons to join the optimistic camp on the first day of this year. We at the site have a lot to be thankful for on a personal level. For example, this contribution represents the milestone 100th posting since the site began in September. Additionally, the site has been recognized as a top blawg in both student and legal theory categories by the folks at Justia.com and has had stories picked up by other blogs and websites all over the world. We have also had the great pleasure of posting fantastic contributions by very smart people tackling some very difficult topics, and have been thrilled to see the insightful comments made by followers of the site (excluding of course the advertisements in Mandarin for x-rated movies in November.)
In addition to what are admittedly personal signs of hope are some more broadly consequential current news items adding to a sense of hope. Among these are included the rally of US equities during the year, the declining rate of jobless claims over the past few weeks, and perhaps the most heartwarming news of all; the elimination of combat deaths of American troops in Iraq during the month of December. Though good news in its own right, the statistic is hardly a blip, for troop deaths have been on the decline since the first half of 2009. Whatever side of the Iraq debate one finds themselves, that is surely encouraging. Here's hoping that the noted trends continue and lead to even greater news in the coming year. If so, 2010 could truly be a year worthy of kicking off a new decade.
However, despite these concerns and its practice of taking a daily serving of realism, BlawgConomics sees reasons to join the optimistic camp on the first day of this year. We at the site have a lot to be thankful for on a personal level. For example, this contribution represents the milestone 100th posting since the site began in September. Additionally, the site has been recognized as a top blawg in both student and legal theory categories by the folks at Justia.com and has had stories picked up by other blogs and websites all over the world. We have also had the great pleasure of posting fantastic contributions by very smart people tackling some very difficult topics, and have been thrilled to see the insightful comments made by followers of the site (excluding of course the advertisements in Mandarin for x-rated movies in November.)
In addition to what are admittedly personal signs of hope are some more broadly consequential current news items adding to a sense of hope. Among these are included the rally of US equities during the year, the declining rate of jobless claims over the past few weeks, and perhaps the most heartwarming news of all; the elimination of combat deaths of American troops in Iraq during the month of December. Though good news in its own right, the statistic is hardly a blip, for troop deaths have been on the decline since the first half of 2009. Whatever side of the Iraq debate one finds themselves, that is surely encouraging. Here's hoping that the noted trends continue and lead to even greater news in the coming year. If so, 2010 could truly be a year worthy of kicking off a new decade.
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